TIDMHHR
RNS Number : 0728B
Helphire Group PLC
27 February 2014
-- News Release --
Helphire Group plc
Issue Date: 27 February 2014
Interim Results for the six months ended 31 December 2013
Helphire restoration pays dividends
Financial headlines
-- Adjusted* operating profit of GBP4.2m (2012: GBP3.1m)
-- Adjusted* profit before tax of GBP4.2m (2012: GBP0.5m)
-- Debtor days reduced to seasonal record low of 135 days (2012: 155 days)
-- Total cash balances of GBP75.7m
-- Net cash of GBP62.0m (2012: net debt of GBP95.3m)
-- Shareholders funds GBP136.6m (2012: GBP10.7m)
-- Adjusted* basic EPS 0.307 pence (2012: 0.147 pence)
-- Statutory basic EPS 0.340 pence (2012: 0.046 pence)
-- Planned third interim dividend of 0.054 pence declared making
0.335 pence for the period (2012: nil)
Operational headlines
-- Credit hire cases at 47,000 cases; (2012: 52,000)
-- Open case count reduced by 18% to 37,000 cases (2012: 45,000 cases)
-- Cases >120 days reduced by 24% to 19,000 cases (2012: 25,000 cases)
-- Revenue generating fleet utilisation maintained at 82% (2012: 82%)
-- Protocol case settlement with insurers continuing to grow for mutual benefit
* Adjusted measures exclude the impact of the items described as
exceptional in Note 5 of the Interim Report and Accounts.
Commenting on the Group's results and prospects, Martin Ward,
Chief Executive Officer said:
"As a board we are pleased to note the continued improvement in
profits and operational efficiency as well as the closer working
relationships with many insurers. Our strategy is to continue
building our product and service offering that appeals to our wide
Partner base whilst continuing to focus on providing a high quality
service to all of our Partners and their customers. This remains a
key driver in our goal for continued success. We are also pleased
to announce a further interim dividend which supports our
commitment to our stated dividend policy."
For further information, contact: 01225 321134
Helphire Group plc
Martin Ward, Chief Executive Officer
Stephen Oakley, Chief Financial Officer
Cenkos Securities plc 0207 397 8900
Ian Soanes
Max Hartley
Square1 Consulting 020 7929 5599
David Bick
Mark Longson
Notes to Editors:
Founded in 1992, Helphire is one of the market leaders in
providing accident assistance to non-fault motorists involved in
road accidents. In partnership with the insurance and motor
industries Helphire delivered accident management solutions to over
100,000 motorists in 2013 including legal representation, ensuring
that they remain mobile until their own vehicles are repaired or
until they are put in a position to obtain a replacement.
Chairman's Statement
I am pleased to be able to report to shareholders that the
improvement in the Group's results following the actions that have
been taken-over the past 2 years has continued and that the Group
achieved a profit before taxation of GBP4.7 million compared to
GBP0.2 million in the corresponding period last year.
Results
The total numbers of hire cases were 17.4% lower at 54,500 a
reduction of 11,500 cases of which 7,400 was in relation to lower
margin direct hire business. Hires in respect or our core credit
hire business reduced by 4,100 cases, a reduction of 7.9% on last
years credit hires following falls seen in during 2013 in national
accident rates.
I can report that as a result of changes in the mix of claims
handled, hire length, which is a major driver in the Group's
profitability, increased to an average of 16.9 days during the
period, compared to the average of 16.4 days reported for the year
to 30 June 2013 and this also represents an increase over the 16.5
days seen in the corresponding period last year.
Revenues were GBP92.3m (2012: GBP109.9m), a reduction of
GBP17.6m (16.0%) which is principally as a result of the effects of
the ban on the receipt and payment of referral fees in respect of
personal injury cases that came into effect on 1 April 2013 which
accounts for GBP11.4m of the reduction. The balance of the
reduction is mostly due to a reduction in the volume of credit
repairs handled consequent upon changes in the mix of referrer
cases received and a reduction in low margin direct hire business.
Revenues from core credit hires were virtually unchanged from the
corresponding period last year reflecting improvements in
components of the mix of business.
The adjusted operating profit for the period was GBP4.2m with a
much improved operating margin of 4.5% (2012: GBP3.1m and
2.8%).This increase principally reflects improved margins as a
consequence of changes in the mix of cases handled, a number of
improvements seen in our supply chain and further significant
reductions (12.5%) in group overhead costs compared to the
corresponding period last year.
Adjusted profit before tax for the period was GBP4.2m (2012:
GBP0.5m). A pre-tax exceptional net credit of GBP0.5m (2012: cost
of GBP0.3m) was recorded in the period reflecting a credit of
GBP0.9m in respect of the benefits of surrendering onerous leases
partially offset by the GBP0.4m cost recorded under IFRS2 in
respect of the charge under share based payments on incentive share
schemes adopted as part of the March 2013 restructuring. After
exceptional items, statutory profit before tax was GBP4.7m (2012:
GBP0.2m).
Earnings Per Share
Statutory basic EPS is 0.340p (2012: 0.046p). Statutory diluted
EPS is 0.315p (2012: 0.046p).
The adjusted EPS is 0.307p (2012: 0.147p). The adjusted diluted
EPS is 0.284p profit (2012: 0.147p).
Dividends
Two interim dividends were declared on 27 September 2013 (0.110
pence per share paid on 25 October 2013) and 28 November 2013
(0.171 pence per share paid on 10 January 2014).
The board has pleasure in declaring a third interim dividend of
0.054 pence per share payable on 27 March 2014 to those
shareholders on the register on 7 March 2014 (2012: GBPnil). This
dividend makes a total of 0.335 pence declared for the year to
date.
The board expects to declare any final dividend with its full
year results for the year ended 30 June 2014 at the end of
September 2014.
I am pleased to note that dividends declared in the 12 months
since the GBP25.6 million open offer and placing at 2.5 pence that
was completed on 28 March 2013 amount to 0.500 pence per share and
total net dividends of GBP8.5 million. The total dividends per
share of 0.500 pence equates to a net dividend yield of 20% over
the period for those shareholders participating in the March 2013
open offer and placing at 2.5 pence.
Receivables
Trade and other receivables reduced to GBP75.7m, an improvement
of GBP1.9m from 30 June 2013 and an improvement of GBP25.2m over
the prior year comparable period (2012: GBP100.9m). Statutory
debtor days were in line with our seasonal expectations at 135 days
and compare to 155 days at 31 December 2012.
Cash and Debt
The Group has continued to meet its targets for cash collections
and improving cash inflow. Excluding the net proceeds from the
placing that was completed on 24 December 2013, net cash has been
increased by GBP3.3m since 30 June 2013 to GBP4.4m (December 2012:
net debt of GBP95.3m) notwithstanding dividends of GBP4.3m being
paid during the period.
Outlook
We note that the Competition Commission has recognised that
consumers do not fully understand their legal rights in a non-fault
accident and we welcome their call for greater transparency which
has been a key element of the Group's dealings with consumers and
others in the market for many years. We continue to develop
improved ways of working with our business partners and suppliers
and are implementing a business model that is more resilient to the
changes in the market and also involves a sustainable underlying
model that better aligns the economic risk and reward in our
business.
On 24 December 2013 the Group completed a share placing raising
GBP60 million before expenses in order to fund its strategic growth
plans. Our criteria for acquisitions is that they must be earnings
enhancing and have a cash generation profile that supports our
current dividend policy which is in the absence of unforeseen
circumstances, or other requirements or commitments to which the
Directors should have regard, to distribute as much of the profits
by way of dividend as it reasonably and legitimately can, provided
sufficient cash is available to pay such dividends.
We have also announced today that contracts have been exchanged
(with completion commencing on 28 February 2014) for the
acquisition of the New Law group of companies comprising New Law
Legal Limited and its associated companies and partnership
interests (the "New Law Group"). The New Law Group is a leading
personal injury legal firm with complementary businesses in medical
reporting and legal costs drafting.
This acquisition is the first step in our strategy (i) to
develop a top tier UK personal injury legal services business that
can provide a comprehensive range of services to our referral
partners (ii) to build upon our base as one of the largest, longest
established, replacement vehicle providers and (iii) to take
opportunities for organic growth within our existing
businesses.
The second half has started well with performance in the first
few weeks in line with our expectations. The combination of
strategic acquisitions as demonstrated above, as well as continuing
to deliver organic growth and further improvements in operational
efficiency from our new business model, gives the board great
encouragement for the future.
Our people
Once again we thank our employees for their support, hard work
and loyalty during the period.
Avril Palmer-Baunack
Chairman
27 February 2014
Operational and Financial Review
Operational review
The Group has continued to make good progress in implementing
the necessary changes to achieve a business model that is more
resilient to the changes in the market. These include moving to a
sustainable underlying model that better aligns the economic risk
and reward in our business. In accordance with this model the Group
has deliberately not sought to secure low margin volume business
which relies principally upon price driven criteria in priority to
service quality.
The continued improvement in the Group's operational practices
and systems has facilitated excellent working relationships with
many insurers. This has contributed to a growing number of
bi-lateral protocol agreements with those insurers that has seen
improvements in cash collection cycles and at the same time has
continued to remove frictional costs for both parties. This has
lead to debtor days being reduced in line with our expectations to
a seasonal record low of 135 days.
Market investigation by the Competition Commission
The period has seen significant regulatory activity in respect
of the ongoing investigation by the Competition Commission ("CC")
in relation to a market investigation into the UK market for the
supply or acquisition of private motor insurance and related goods
and services (which includes the credit hire industry) and they are
required to issue their final report by the end of September
2014.
The Group has been engaged with the CC in this respect and has
provided numerous documents and a considerable amount of data in
response to the various "theories of harm" that the CC hypothesise
as being relevant in the market.
On 17 December 2013 the CC issued details of its interim report
which concluded that it had provisionally found an Adverse Effect
on Competition ("AEC") in a number of areas of the total market.
The particular areas of concern were described as being in relation
to:
1. The separation of cost liability and cost control in handling claims
2. An inefficient supply chain
3. Limited monitoring of the quality of repairs
4. Limited transparency in the sale of add-ons, by insurers,
brokers and intermediaries, such as motor legal expenses insurance,
courtesy car cover, key loss cover and non claims bonus cover
5. Distortive practices in car insurance price comparison websites.
The part of the market in which the Group principally operates
in is represented by paragraphs 1 - 3 above and the estimated AEC
cost of this has since been revised downwards by the CC as equating
to GBP5 to GBP6 per private car insurance policy (GBP120m - GBP155m
or 1.1% to 1.4% in an estimated GBP11billion market). This equates
to just over 10 pence per policy per week.
In the same report the CC sought feedback from those in the
industry and other interested parties on the practicality and cost
of some possible remedies including:
1. First party insurance for replacement cars being the responsibility of not at fault insurers
2. Giving at-fault insurers the first option to handle non-fault claims
3. Cost caps on car repairs and car write offs
4. Prohibiting car hire and repair referral fees
5. Regulations for improved disclosure and transparency on
pricing, repairs and insurance policy add-ons.
The existing overriding position under English Law is that
parties that are not at fault in road accidents are entitled to be
re-instated to their former position. The CC recognised that remedy
items 1 and variations of 2 above in particular would require
significant changes in current legislation, because the legal
entitlements currently held by insurance policyholder consumers
and/or not at fault drivers could be materially diminished and that
for all remedies generally there might be implementation costs and
unintended consequences of these possible remedies which could be
likely to outweigh any possible benefits.
It is our view that the diminishing of consumer rights that have
been enshrined in law over hundreds of years and covering rights of
restitution which reach far beyond that applicable to just motor
insurance claims would be against consumer interests with
significant potential for unintended consequences. It also remains
our view that insurers will not want to burden their own balance
sheet by providing accident management services themselves or
attempt to price for this upfront, in insurance premiums, lest they
become uncompetitive. Claims for replacement vehicles will continue
to require representation, are not simple to handle and require a
detailed knowledge and skill to manage effectively, which is a core
activity of Helphire's service provision.
The Group welcomes the CC's call for greater transparency which
has been a key element of the Group's dealings with consumers and
others in the market for many years. We note that the CC has
recognised that consumers generally do not understand their legal
rights in a non-fault accident and that they are considering,
through the issue of an enforcement notice, requiring insurers and
others involved in handling the First Notification of Loss to
provide clear and concise information to include:
1. what happens when a claimant is at fault or not at fault and
what the basic legal entitlements are in each case (in relation to
both repairs and replacement cars);
2. whether a claimant claiming under their own insurance policy
would have to pay an excess and/or would lose any NCB and how these
can be recovered;
3. when a claimant is entitled to choose their own repairer and
whether this affects their liability to pay an excess; and
4. what a claimant's contractual rights are if the claimant is
unsatisfied with the repairs carried out.
The above information mirrors what the Group already provides to
consumers as part of the service provided and it is considered that
the provision of more information by the industry would further
underline the benefits of consumers using the Group's services.
The Group will continue to make appropriate representations to
the CC over coming months in respect of all the matters contained
above.
Settlement provision and case management
The total number of open cases has been further reduced by 18%
in the twelve month period to 37,000 cases (2012: 45,000 cases).
Cases >120 days reduced by 24% to 19,000 cases (31 December
2012: 25,000 cases). The number of cases with solicitors has also
been halved to 5,000 cases (31 December 2012: 10,000 cases)
Recoveries during the period have been increasingly encouraging
with over 70% of new claims being settled within 90 days of
request, which is testament to the better working relationships
with at-fault insurers and improvements in procedures and processes
that have been achieved over the last two years. This has
facilitated an increasing number of settlement protocols being put
in place with certain insurers to remove frictional costs and
accelerate settlement. At the end of the period almost 45% of the
Group's business was subject to bilateral protocol arrangements and
this is likely to increase in future months providing further
savings in frictional costs for both insurers and ourselves and
further improvements to cash collections profiles.
Autofocus
As reported in November 2013, the Group is in the preparatory
stages of the Autofocus litigation and has identified several
thousand cases that may have been compromised as a result of
unreliable evidence used by defendant insurers. These cases are
going through due process, which involves the intermediaries
approved by the court presenting data obtained to solicitors acting
for the Autofocus Liquidators before being made available to the
Group in order to allow the Group to represent its losses to
insurers. Although some data has been received the overall process
continues to be frustrated by a series of objections and challenges
by solicitors acting for the intervening insurers. It is the
Group's view (on advice) that these challenges are without merit
given the terms of the existing disclosure order. The solicitors
acting for the interveners that have objected have been challenged
to articulate their objections with the clarity that a court would
expect. If they do not withdraw their objections the group is
prepared to refer the matter back to the High Court for
resolution.
Despite the delay caused by the above, subject to being
satisfied that we have identified the full extent of our losses, we
still expect to begin settlement negotiations with insurers over
the coming months. We still intend, where possible, to resolve
matters with insurers without litigation. It would not be
appropriate to speculate on the outcome of any negotiations at this
stage, but we will provide an update when we are able to do so.
Vehicle fleet
The Group continues to operate highly effective fleet services
through a hybrid solution of ownership, contract hire and, during
peak periods, cross-hiring from daily rental companies. This
combination allows flexibility to dispose of excess fleet in the
lower volume summer months or in the event of a downturn and to
maximise fleet, without incurring ownership costs, in short peak
periods.
The average age of the fleet continues to be maintained at less
than 12 months with a broad spread of manufacturers and models. Our
efforts to better balance the mix of the fleet to meet a changing
demand profile continued and in response to falling levels of
accident rates and consequent referrals the average number of
vehicles held was reduced by 10.1% from 6,494 at 31 December 2012
to 5,837 at 31 December 2013. This enabled fleet utilisation to be
maintained at 82% (2012: 82%) which is considered a creditable
performance. Our fleet comprised of 6,567 vehicles at 31 December
2013 compared to 7,434 at 31 December 2012 and 5,836 at 30 June
2013.
Financial review
Certain items have been reported and disclosed as exceptional on
the face of the Income Statement and these items are commented on
separately as appropriate further in this Financial Review. The
Income Statement captions excluding these exceptional items more
properly reflect the comparable operating performance of the
business and for ease of reference are referred to as
'adjusted'.
For the six months ended 31 December 2013, the Group recorded an
adjusted operating profit of GBP4.2m (2012: GBP3.1m) together with
an adjusted profit before tax of GBP4.2m (2012: GBP0.5m) and a
statutory profit before tax of GBP4.7m (2012: GBP0.2m).
A summary of the key performance indicators and financial
results is set out in the table below.
12 months
6 months ended 6 months ended ended
31 December 31 December
2013 2012 30 June 2013
===================================== ============== ============== ============
Operational KPIs
Hire cases 54,516 65,962 128,739
Credit hire 47,484 51,566 100,373
Standard hire 7,032 14,396 28,366
Repair cases 21,210 22,626 41,419
% of credit hire cases 44.7% 43.9% 41.3%
Hire days 921,180 1,089,997 2,113,439
Average days hire 16.9 16.5 16.4
Average fleet revenue generating
utilisation 81.6% 81.8% 80.7%
Financial KPIs
Revenue (GBP'000) 92,260 109,938 204,767
Gross profit (GBP'000) 21,608 23,031 46,131
Gross margin 23.4% 20.9% 22.5%
Adjusted operating profit* (GBP'000) 4,195 3,132 7,961
Adjusted operating margin* 4.5% 2.8% 3.9%
Debtor days 135 155 126
===================================== ============== ============== ============
* Adjusted measures exclude the impact of the items described as
exceptional in Note 5.
Revenue and hire length
Group revenue of GBP92.3m for the period ended 31 December 2013
(2012: GBP109.9m) was GBP17.6m or 16.0% lower than the prior
comparable period. This reflected principally the effect of the ban
on and cessation of Personal Injury referral fees that came into
force on 1 April 2013 which accounted for GBP11.4m of the
reduction. The balance of the reduction was mostly due to fewer
credit repairs handled consequent upon changes in the mix of
referrer cases received, lower accident rates and less low margin
direct hire business. Revenues from core credit hire were unchanged
from the corresponding period last year.
The total number of hire cases were 17.4% lower at 54,500 a
reduction of 11,500 cases of which 7,400 related to lower margin
direct hire business; hires in respect or our core credit hire
business reduced by 4,100 cases, a reduction of 7.9% following the
reduction in national accident rates in 2013.
As a result of changes in the mix of claims handled, hire
length, which is a major driver in the Group's profitability,
increased to an average of 16.9 days during the period, compared to
the average of 16.4 days reported for the year to 30 June 2013 and
is also an increase over the 16.5 days seen in the corresponding
period last year.
Gross profit and adjusted operating profit
Gross profit was GBP1.4m lower than the corresponding period
last year but a much improved gross margin of 23.4% (2012: 20.9%)
was achieved which saw an increase of 2.5% versus the 2012
comparable period. The loss of cash margin principally reflects the
cessation of the low margin personal injury referral fee activity
from 1 April 2013. Gross margin percentage increased, however, as a
result of better margins flowing from the changes in the mix of
cases handled (leading to increased hire lengths) and a number of
improvements seen in our supply chain.
Adjusted operating profit of GBP4.2m (2012: GBP3.1m) increased
by GBP1.1m versus the corresponding period last year which was the
net result of the lower cash gross profit of GBP1.4m offset by a
reduction of overheads of GBP2.5m (12.5%).
Adjusted operating profit margin was 4.5% (2012: 2.8%).
EBITDA was GBP7.8m (2012:GBP8.5m) a reduction of GBP0.7m which
is principally attributable to the switch from vehicles acquired
under finance leases to those supplied under contract hire
arrangements. The reduction in fleet depreciation and fleet finance
lease interest from 2012 amounted to approximately GBP3.1m compared
to an increase in charge for contract hired vehicles compared to
the same period last year of approximately GBP2.0m.
Adjusted operating profit is reconciled to the Income Statement
as follows:
Unaudited Unaudited Audited
12 months
6 months ended 6 months ended ended
31 December 31 December
2013 2012 30 June 2013
GBPm GBPm GBPm
======================================= ============== ============== ============
Adjusted operating profit - continuing
operations 4.2 3.1 8.0
======================================= ============== ============== ============
Adjustments
Exceptional administrative (credit)
/ costs 0.5 (0.3) (5.0)
Statutory operating profit 4.7 2.8 3.0
======================================= ============== ============== ============
Net finance costs
There was net finance income for the period of GBP20,000 (2012:
charge of GBP2.6m) reflecting the full period effect of the
elimination of almost all of the corporate debt from 28 March 2013
as well as interest receivable on cash balances.
Adjusted profit before tax
Adjusted profit before tax of GBP4.2m (2012: GBP0.5m) is an
increase of GBP3.7m over the comparable prior period and is due to
the improvement of GBP1.1m in adjusted operating profit together
with a GBP2.6m reduction in the net interest charge as detailed
above.
Exceptional items
In the period to 31 December 2013, a net credit of GBP0.5m was
recorded in respect of the release of onerous lease provisions
amounting to GBP0.9m following the surrender of certain leases for
empty property together with a charge of GBP0.4m in respect of
share based payments arising as a result of the adoption of the new
share incentive schemes approved by shareholders in March 2013.
The total pre-tax exceptional credit for the period was GBP0.5m
(2012: charge of GBP0.3m), which together with a tax credit of
GBPnil (2012: GBPnil) results in a post tax exceptional credit of
GBP0.5m (2012: charge of GBP0.3m).
Statutory profit before and after taxation
The Statutory profit before tax was GBP4.7m (2012: GBP0.2m).
There was a net tax credit (principally in respect of the further
recognition of a deferred tax asset relating to prior years' losses
and unused allowances) of GBP0.7m, (2012: GBPnil) and therefore the
statutory profit after tax is GBP5.5m (2012: GBP0.2m).
Earnings per share
Statutory basic EPS is 0.340p (2012: 0.046p). Statutory diluted
EPS is 0.315p (2012: 0.046p)
The adjusted EPS is 0.307p (2012: 0.147p). The adjusted diluted
EPS is 0.284p profit (2012: 0.147p)
Dividends
A first interim dividend of 0.110 pence per share was declared
on 27 September 2013 and was paid on 25 October 2013 and a second
interim dividend of 0.171 pence per share was declared on 28
November 2013 and was paid on 10 January 2014.
The board has declared a third interim dividend of 0.054 pence
per share payable on 27 March 2014 to those shareholders on the
register on 7 March 2014 (2012: GBPnil).
Balance sheet
The Group has continued its focus on the reduction of operating
working capital. During the six month period to 31 December 2013
net trade receivables have reduced by GBP1.9m to GBP75.7m and by
GBP25.2m since 31 December 2012. Debtor days have continued to be
reduced as a result of improved settlement levels and associated
cash collection following an increase number of protocol
arrangements and now stand at a record seasonal low of 135 days (31
December 2012: 155 days) and compare to 126 days at 30 June
2013.
The Group also made greater use of vehicle contract hire
arrangements which have been available at very competitive rates
during the period with flexible terms and as a consequence there
was a net reduction of GBP12.6m of vehicles held as fixed assets
under finance leases since 31 December 2012 although in the period
since 30 June 2013 an increased proportion of vehicles has been
acquired on finance leases.
Net assets at 31 December 2013 were GBP136.6m.
Net debt and financing
Total net cash at 31 December 2013 (excluding GBP57.6m net
proceeds of the placing that was completed on 24 December 2013) was
GBP4.4m: this compares with net debt of GBP95.3m at 31 December
2012 and net cash of GBP1.1m at 30 June 2013. In addition there was
GBP57.6m of cash representing the net proceeds of the placing that
was completed on 24 December 2013 and so total cash balances were
GBP75.8m and total net cash balances were GBP62.0m.
Net cash is analysed as follows:
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 December
2013 31 December 2012 30 June 2013
GBPm GBPm GBPm
============================= ============== ================ ===============
Fleet
Finance leases 13.7 27.6 12.3
Bank Fleet Finance Loans - 4.8 2.6
============================= ============== ================ ===============
Total fleet funding
debt 13.7 32.4 14.9
============================= ============== ================ ===============
Corporate
Working capital loans - 25.0 -
Term loans - 28.4 -
Share purchase loan - 7.5 -
Mortgages - 8.2 5.1
Other finance leases 0.1 0.2 0.1
Unamortised debt arrangement
fees - (1.9) -
============================= ============== ================ ===============
Total corporate debt 0.1 67.4 5.2
============================= ============== ================ ===============
Total debt 13.8 99.8 20.1
Working capital cash (18.2) (4.5) (21.2)
============================= ============== ================ ===============
Net working capital
(cash) / debt (4.4) 95.3 (1.1)
Net cash balances from
placing (57.6) - -
============================= ============== ================ ===============
Net (cash) / debt (62.0) 95.3 (1.1)
============================= ============== ================ ===============
Principal risks and uncertainties
Principal risks and uncertainties are detailed in note 20 to
this announcement
Related party transactions
There were no related party transactions during the period that
require disclosure.
Martin Ward Stephen Oakley
Chief Executive Officer Chief Financial Officer
27 February 2014 27 February 2014
The full Interim report will be made available shortly at
http://www.helphire.com/helphire/ir/repsaccounts/. Printed copies
will not be available.
Condensed Consolidated Income Statement
For the six months ended 31 December 2013
6 months 6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended ended
31 December 31 December 31 December 31 December 31 December 31 December
2013 2013 2013 2012 2012 2012
Adjusted* Exceptional Adjusted Exceptional
items* * items*
Unaudited Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
Total Revenue 3 92,260 - 92,260 109,938 - 109,938
--------------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
Cost of sales** (70,652) - (70,652) (86,907) - (86,907)
Gross profit 21,608 - 21,608 23,031 - 23,031
Administrative
expenses 5 (17,413) 540 (16,873) (19,899) (333) (20,232)
Operating profit
- continuing
operations 4,195 540 4,735 3,132 (333) 2,799
Net finance income
/(costs) 6 20 - 20 (2,646) - (2,646)
Profit before
taxation 4,215 540 4,755 486 (333) 153
Taxation 7 742 - 742 - - -
--------------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
Profit / (loss)
for the period 4,957 540 5,497 486 (333) 153
--------------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
Profit for the period
attributable to:
Equity holders
of the Company 5,011 540 5,551 486 (333) 153
Non Controlling
Interests (54) - (54) - - -
Profit / (loss)
for the period 4,957 540 5,497 486 (333) 153
--------------------- ----- ------------- ------------- ------------- ------------- ------------- -------------
Earnings per share
(p)
Basic 8 0.307 0.033 0.340 0.147 (0.101) 0.046
Diluted 8 0.284 0.031 0.315 0.147 (0.101) 0.046
* Adjusted profit excludes the impact of those items described as exceptional,
namely restructuring costs. See Note 5 for further details.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2013
6 months 6 months
ended 31 ended
December 31 December
2013 2012
Unaudited GBP'000 GBP'000
--------------------------------------------------------- ---------- -------------
Profit for the period 5,497 153
Other comprehensive income
Gains arising during the period - -
--------------------------------------------------------- ---------- -------------
Total comprehensive income for the period, attributable
to:
Equity holders of the Company 5,551 153
Non-controlling interests (54) -
--------------------------------------------------------- ---------- -------------
Total comprehensive income for the period 5,497 153
--------------------------------------------------------- ---------- -------------
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2013
Share Share Retained Total Non- Total
Note capital premium earnings Controlling
account interests
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- --------- --------- ---------- -------- ------------- --------
Six months ended 31 December
2013
Balance at 1 July 2013 166 - 76,842 77,008 - 77,008
Profit for the period - - 5,551 5,551 (54) 5,497
Other comprehensive income - - - - -
------------------------------- ------- --------- --------- ---------- -------- ------------- --------
Total comprehensive income
for the period - - 5,551 5,551 (54) 5,497
Issue of Ordinary Shares 17 117 60,296 - 60,413 - 60,413
Expenses on issue of ordinary
shares (2,476) (2,476) - (2,476)
Credit to equity for equity
settled share-based payments - - 442 442 - 442
Dividends paid - - (4,306) (4,306) - (4,306)
Balance at 31 December 2013 283 57,820 78,529 136,632 (54) 136,578
------------------------------- ------- --------- --------- ---------- -------- ------------- --------
Share Share Retained Total Non- Total
capital premium earnings Controlling
account interests
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- --------- --------- ---------- -------- ------------- --------
Six months ended 31 December
2012
Balance at 1 July 2012 16,567 107,103 (113,164) 10,506 - 10,506
Profit for the period - - 153 153 - 153
Other comprehensive income - - - - -
------------------------------- ------- --------- --------- ---------- -------- ------------- --------
Total comprehensive income
for the period - - 153 153 - 153
Credit to equity for equity
settled share-based payments - - 18 18 - 18
Balance at 31 December 2012 16,567 107,103 (112,993) 10,677 - 10,677
------------------------------- ------- --------- --------- ---------- -------- ------------- --------
Condensed Consolidated Statement of Financial Position
As at 31 December 2013
Unaudited Unaudited Audited
31 December 31 December 30 June
2013 2012 2013
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 10 18,950 18,950 18,950
Property, plant and equipment
(including vehicles) 11 18,047 43,342 16,811
Deferred tax asset 5,892 1,659 5,150
42,889 63,951 40,911
Current assets
Trade and other receivables 12 75,651 100,890 77,561
Assets held for sale 13 - - 4,830
Cash and cash equivalents 75,751 4,484 21,199
------------------------------- ----- ------------- ------------- ---------
151,402 105,374 103,590
Total assets 194,291 169,325 144,501
------------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other payables 14 (39,142) (51,090) (40,529)
Obligations under finance
leases 15 (7,841) (21,835) (7,329)
Short-term borrowings 16 - (3,965) (2,919)
Provisions (2,303) (1,740) (2,005)
------------------------------- ----- ------------- ------------- ---------
(49,286) (78,630) (52,782)
------------------------------- ----- ------------- ------------- ---------
Net current assets (145,005) 26,744 50,808
------------------------------- ----- ------------- ------------- ---------
Non-current liabilities
Long-term borrowings 15 - (68,017) (4,712)
Obligations under finance
leases 16 (5,945) (5,928) (5,108)
Deferred tax liability - (131) -
Long-term provisions (2,482) (5,942) (4,891)
------------------------------- ----- ------------- ------------- ---------
(8,427) (80,018) (14,711)
------------------------------- ----- ------------- ------------- ---------
Total liabilities (57,713) (158,648) (67,493)
------------------------------- ----- ------------- ------------- ---------
Net assets 136,578 10,677 77,008
------------------------------- ----- ------------- ------------- ---------
Equity
Share capital 17 283 16,567 166
Share premium account 17 57,820 107,103 -
Retained earnings 78,529 (112,993) 76,842
Equity attributable to owners
of the Company 136,632 10,677 77,008
Non-controlling interests (54) - -
Total equity 136,578 10,677 77,008
------------------------------- ----- ------------- ------------- ---------
Company Registration Number :03120010
Condensed Consolidated Statement of Cash Flows
For the six months ended 31 December 2013
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2013 2012
Note GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Cash flows from
operating
activities
Profit 5,497 153
Tax credit (742) -
Net finance
(income) /
costs 6 (20) 2,646
Fleet finance
lease interest 6 507 1,241
Depreciation,
amortisation
and impairment
charges 1,863 4,388
Loss on sale of
tangible fixed
assets 223 95
Share-based
payment
charges 442 18
-------- ---------
EBITDA 7,770 8,541
Decrease in
receivables 1,898 7,020
(Decrease) /
increase in
payables (989) 897
Decrease in
provisions (2,112) (964)
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Cash generated
from operating
activities 6,567 15,494
Bank interest
received 6 64 6
Bank and loan
interest paid (35) (2,149)
Fleet finance
lease interest 6 (507) (1,241)
Interest
element of
finance
lease rentals 6 (9) (23)
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
(487) (3,407)
Taxation - -
received
/(paid)
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Net cash from
operating
activities 6,080 12,087
Cash flows from
investing
activities
Purchase of
property,
plant
and equipment (403) (2,089)
Proceeds from
sale of
property,
plant and
equipment 7,570 12,202
Net cash from
investing
activities 7,167 10,113
Cash flows from
financing
activities
Proceeds from
issues of
share
capital 17 60,014 -
Expenses of
share issues 17 (2,476) -
Dividends paid 9 (4,306) -
Net proceeds
from issue of
new loans 18 - 128
Repayment of
borrowings 18 (6,339) (1,216)
Loan issue
costs 18 - (951)
Finance lease
principal
repayments (5,588) (17,759)
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Net cash inflow
/ (outflow)
from financing
activities 41,305 (19,798)
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Net increase in
cash and cash
equivalents 18 54,552 2,402
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Cash and cash
equivalents at
the beginning
of the period 21,199 2,082
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Cash and cash
equivalents at
the end of the
period 75,751 4,484
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Cash and cash
equivalents
consisted
of:
Cash at bank
and in hand 75,751 4,484
---------------- ----- -------- ----------------------------------------- --------- ----------------------------------------
Notes to the Interim Statements
1 Basis of preparation
The condensed consolidated financial statements are prepared
using accounting policies consistent with International Financial
Reporting Standards and in accordance with International Accounting
Standard ('IAS') 34, 'Interim Financial Reporting'.
The information for the year ended 30 June 2013 does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on these accounts was not qualified and did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under Section 498 (2) or (3) of the Companies Act
2006.
The condensed consolidated financial statements have been
prepared under the going concern assumption.
The directors have assessed the future funding requirement of
the Group and the Company, and have compared them to the levels of
available cash and funding resources. The assessment included a
review of current financial projections to June 2015. Recognising
the potential uncertainties surrounding financial projections in
the current economic environment, in particular with regard to the
demand for the Group's services and the cash collection profiles
from insurers, the directors have considered a number of scenarios
and the mitigating actions the Group could take to limit any
adverse consequences.
Having undertaken this work, the Directors are of the opinion
that the Group has adequate resources to finance its operations for
the foreseeable future and accordingly, continue to adopt the going
concern basis in preparing the Interim Report.
2 Significant accounting policies
The condensed consolidated financial statements have been
prepared under the historical cost convention. The same accounting
policies, presentation and methods of computation have been applied
in these condensed consolidated financial statements as were
applied in the Group's financial statements for the year ended 30
June 2013.
In the application of the Group's accounting policies the
Directors are required to make judgements, estimates and
assumptions about the carrying value of the assets and liabilities
that are not readily apparent from the other sources. The estimates
and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
The critical judgements affecting the Group's interim financial
statements are the valuation of the receivables (see Note 3) and
depreciation of the vehicle fleet (see Note 11) and goodwill
impairment (see Note 10).
3 Revenue
Unaudited 6 months Unaudited 6 months
ended 31 December ended 31 December
2013 2012
GBP'000 GBP'000
Revenue 92,260 109,938
--------- ------------------- -------------------
As fully disclosed within Note 13 to the consolidated financial
statements for the year ended 30 June 2013, the estimation of the
expected adjustment arising on the settlement of claims is revised,
where necessary, at each balance sheet date to reflect the Group's
most recent estimation of amounts ultimately recoverable. Although
in principle this is determined by reference to individual cases,
in practice the homogenous nature of most claims means that the
level of adjustment is calculated by reference to specific
categories of claims. Adjustments arising from subsequent revision
of the Group's expected adjustment arising on settlement of claims,
including amounts received by way of late payment charges, are
recorded in revenue in the Income Statement.
4 Business segments
The condensed consolidated financial statements are in respect
of the Group's sole business segment of accident management
services, conducted in the United Kingdom. The Directors consider
that the business comprises a single segment within the meaning of
IFRS 8, 'Operating segments'. (See Note 2 to the Annual Report and
Accounts for the year to 30 June 2013.)
Notes to the Interim Statements (continued)
5 Exceptional items
Exceptional items are items which due to their size, incidence
or non recurring nature have been classified separately in order to
draw them to the attention of the reader of the accounts and, in
the opinion of the Board, to show more accurately the underlying
results of the Group. Such items are disclosed separately on the
face of the consolidated income statement.
Adjusted profit
As discussed in the Operational and Financial Review, in order
to provide a comparable view of the underlying performance of the
Group, the adjusted profit has been presented in the condensed
consolidated income statement. Adjusted profit excludes the impact
of those items described as exceptional, as discussed in more
detail below.
Unaudited Unaudited
6 months 6 months
ended 31 ended 31
December December
2013 2012
------------------------------------------- ---------- ----------
Exceptional items comprise the following:
a) Surplus property restructuring credit
/(costs) 982 (265)
b) Share based payments (442) (18)
c) Other operational restructuring costs - (50)
Impact on operating profit 540 (333)
Tax effect of exceptional items - -
------------------------------------------- ---------- ----------
Impact on operating profit for the period 540 (333)
------------------------------------------- ---------- ----------
a) Surplus property restructuring costs
During the period the Group was able to negotiate the exit from
its residual liability in respect of the lease of an empty property
no longer used by the group by way of making a payment for
surrender. The excess of the residual liability compared to the
surrender value amounted to GBP0.9m and has been credited as an
exceptional item. The tax effect of this item is GBPnil (2012:
GBPnil).
b) Share based payments
Ancillary to the share placing completed on 28 March 2013
certain new share incentive schemes were approved by shareholders
and new options issued to certain directors and staff. During the
period further options were issued under these schemes. In
accordance with IFRS2 the calculated charge in respect of options
issued and outstanding amounts to GBP0.4m for the period. The tax
effect of this item is GBPnil (2012: GBPnil).
6 Finance income and finance costs
Unaudited Unaudited
6 months 6 months
ended 31 ended 31
December December
2013 2012
---------------------------------------------- ---------- ----------
a) Finance income
Interest receivable (64) (6)
---------------------------------------------- ---------- ----------
b) Finance costs
Interest on bank overdrafts and loans 15 2,149
Interest on obligations under finance leases 516 1,264
Bank fees and loan issue costs charged in
the period 20 480
---------------------------------------------- ---------- ----------
551 3,893
Transfer of interest on obligations under
finance leases and fleet facilities to cost
of sales (507) (1,241)
---------------------------------------------- ---------- ----------
Total finance costs 44 2,652
---------------------------------------------- ---------- ----------
Net finance (income) / costs (20) 2,646
---------------------------------------------- ---------- ----------
7 Tax credit
The tax credit comprises the following:
Unaudited Unaudited
6 months 6 months
ended 31 December ended 31 December
2013 2012
GBP'000 GBP'000
-------------------- ------------------- -------------------
Deferred tax credit 742 -
-------------------- ------------------- -------------------
The effective tax credit at the rate of 15.6% differs from the
effective standard rate of UK corporation tax charge of 20.75% as
the Group has recognised a further additional deferred tax asset in
respect of the future use of losses and temporary timing
differences
8 Earnings / (loss) per ordinary share
The calculation of the basic and diluted earnings per share is
based on the following share volume information:
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2013 2012
Number of shares Number Number
Weighted average number of ordinary shares for
the purposes of earnings per share 1,616,416,384 331,347,667
Effect of 2013 share options scheme shares
in issue 22,236,720 -
Effect of B shares in issue 103,898,100 -
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 1,742,551,204 331,347,667
------------------------------------------------ -------------- -------------
There are currently 2,726,637,393 ordinary shares of 0.01p each
in issue as at 26 February 2014.
9 Dividends
A special dividend of 0.165 pence per ordinary share and
amounting to GBP2,576,700 in respect of the year ended 30 June 2013
was announced on 20 June 2013 and was paid on 24 July 2013.
The Board paid a first interim dividend of 0.110 pence per share
and amounting to GBP1,729,020 on account of the year to 30 June
2014 on Friday 25 October 2013.
The Board paid a second interim dividend of 0.171 pence per
share and amounting to GBP2,689,473 on account of the year to 30
June 2014 on Friday 10 January 2014.
The board has announced a third interim dividend on account of
the year to 30 June 2014 of 0.054 pence per ordinary share and
amounting to GBP1,472,384 payable on Thursday 27 March 2014 to
those shareholders on the register at the close of business on
Friday 7 March 2014. The shares will be ex-dividend on Wednesday 5
March 2014.
Ordinary share dividends paid in the period to 31 December 2013
can be summarised as follows:
Unaudited Unaudited
6 months 6 months
ended 31 ended 31
December December
2013 2012
GBP'000 GBP'000
----------------------------------------- ---------- ----------
Special dividend for 2013 of 0.165 pence
paid on 24 July 2013 2,577 -
First interim dividend for 2014 of 0.110
pence paid on 25 October 2013 1,729 -
Total dividends paid in the period 4,306 -
----------------------------------------- ---------- ----------
10 Goodwill
The Directors have undertaken a review of the carrying value of
Goodwill as at 31 December 2013 and have concluded that no
adjustment is necessary. There was therefore no movement in
goodwill in the six months ended 31 December 2013 (2012: nil).
11 Property, plant and equipment (including vehicles)
During the period the Group spent GBP7.3m on additions, being
principally vehicles. GBP6.9m of this was funded by finance leases.
It also disposed of plant and equipment (predominantly vehicles)
with a carrying amount of GBP4.2m for disposal proceeds of GBP4.0m.
Depreciation charges of GBP1.9m were incurred during the
period.
12 Trade and other receivables
Net trade receivables comprise claims due from insurance
companies and self insuring organisations and amounts invoices for
the provision of services to customers. The Group's debtor days at
31 December 2013 were 135 days (31 December 2012: 155 days). This
measure is based upon net trade receivables, other receivables and
accrued income as a proportion of the related sales revenue
multiplied by 365 days.
31 December 31 December 30 June
2013 2012 2013
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ------------ ---------
Net trade receivables 68,192 91,368 69,160
Other receivables 58 626 87
Accrued income 1,064 2,244 1,713
Total receivables for debtor day calculation
purposes 69,314 94,238 70,960
Prepayments 6,337 6,652 6,601
---------------------------------------------- ------------ ------------ ---------
75,651 100,890 77,561
---------------------------------------------- ------------ ------------ ---------
13 Assets held for sale
As a consequence of the removal of all of the historical bank
debt and associated operating restrictions in March 2013 the Board
was able to implement a strategic decision to dispose of all
freehold properties formerly occupied by the Group but either empty
or subject to sub lets. The freehold properties unsold at 30 June
2013 were included under this heading on the balance sheet were all
sold during the period and the associated mortgages
extinguished.
14 Trade and other payables
30 June
31 December 31 December 2013
2013 2012
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- --------
Trade payables 19,408 19,396 21,033
Other taxation and social security 1,218 5,366 3,889
Accruals and deferred income 17,819 26,120 15,344
Other creditors 697 208 263
----------------------------------- ----------- ----------- --------
39,142 51,090 40,529
----------------------------------- ----------- ----------- --------
15 Obligations under finance leases
During the period the Group entered into new finance leases with
a principal value of GBP6.9m and made principal repayments of
existing finance leases of GBP5.6m. Finance leases outstanding at
31 December 2013 amounted to GBP13.8m and compares to GBP12.4m at
30 June 2013 and GBP27.8m at 31 December 2012.
16 Borrowings
The Group no longer has any corporate debt or working capital
facilities with bankers and the group's assets are consequently
unencumbered save those assets financed by finance leases as noted
in Note 15. Total debt owing to banks amounting to GBP7.7m at 30
June 2013 has all been extinguished during the period.
17 Share capital and share premium account
Changes in the share capital or share premium account during the
period are summarised in the Consolidated Statement of Changes in
net Equity and reflect:
a) the issue on 4 October 2013 of a total of 10,200,000 ordinary
shares of 0.01p at a value of 3.38p per share in respect of placing
fees payable to the company's brokers under the terms of the March
2013 placing agreement.
b) the issue on 4 November 2013 and 11 November 2013 of a total
of 954,869 ordinary shares of 0.01p issued for cash at an average
of 2.65p per share as a result of the exercise of options by
certain members of staff under the terms of the 2013 executive
share option schemes.
c) On 24 December 2013 following a general meeting of the
company a total of 1,153,846,160 ordinary shares of 0.01p were then
issued for cash of 5.2p per share to fund the strategic growth
plans of the Company.
18 Cash flow information
Audited Cash Other non-cash Decrease/ Unaudited
30 June flow changes (increase) 31 December
2013 GBP'000 GBP'000 in net 2013
GBP'000 debt GBP'000
GBP'000
------------------------------- --------- --------- --------------- ------------ -------------
Analysis and reconciliation
of net debt
Net cash and cash equivalents 21,199 54,552 - 54,552 75,751
------------------------------- --------- --------- --------------- ------------ -------------
Debt due within one year (2,919) 2,586 333 2,919 -
Debt due after more than
one year (4,712) 3,753 959 4,712 -
(7,631) 6,339 1,292 7,631 -
Finance leases (12,437) 5,588 (6,937) (1,349) (13,786)
------------------------------- --------- --------- --------------- ------------ -------------
(20,068) 11,927 (5,645) 6,282 (13,786)
Net cash / (debt) 1,131 66,479 (5,645) 60,834 61,965
------------------------------- --------- --------- --------------- ------------ -------------
Audited Cash Other non-cash Decrease/ Unaudited
30 June flow changes (increase) 31 December
2012 GBP'000 GBP'000 in net 2012
GBP'000 debt GBP'000
GBP'000
------------------------------- ---------- --------- --------------- ------------ -------------
Analysis and reconciliation
of net debt
Net cash and cash equivalents 2,082 2,402 - 2,402 4,484
------------------------------- ---------- --------- --------------- ------------ -------------
Debt due within one year (3,648) 1,216 (2,560) (1,344) (4,992)
Debt due after more than
one year (71,283) (128) 2,560 2,432 (68,851)
Unamortised loan issue costs 1,390 951 (480) 471 1,861
------------------------------- ---------- --------- --------------- ------------ -------------
(73,541) 2,039 (480) 1,559 (71,982)
Finance leases (39,367) 17,759 (6,155) 11,604 (27,763)
------------------------------- ---------- --------- --------------- ------------ -------------
(112,908) 19,798 (6,635) 13,163 (99,745)
Net cash/(debt) (110,826) 22,200 (6,635) 15,565 (95,261)
------------------------------- ---------- --------- --------------- ------------ -------------
19 Approval of Interim Financial Statements
The Interim Financial Statements were approved by the Board of
Directors on 26 February 2014.
20. Principal Risks and Uncertainties
The Group faces a range of risks and uncertainties. The
processes that the Board has established to safeguard both
shareholder value and the assets of the Group are described more
fully in the Directors' Report in the Annual Report and Accounts.
Set out here are those specific risks and uncertainties that the
directors believe could have the most significant adverse impact on
the Group's business. The risks and uncertainties described below
are not intended to be an exhaustive list.
Adverse economic conditions
The Group's operating and financial performance is affected by
the economic conditions in the United Kingdom. The current
uncertain economic conditions in the United Kingdom and globally
and the volatility of international markets could result in
continued or further changes to driving patterns, car usage and
ownership and this may result in lower miles driven and lower
numbers of accidents and therefore reduced business volumes. Any
such adverse effects on the Group's business might affect its
relationships and/or terms of business with, and ultimately even
the loss of, some key business partners. The current economic
uncertainty might also affect its key business partners and
referrers and/or generally have an adverse impact on the insurance
or other industries in which the Group's key trading partners
operate. This in turn could lead to more onerous terms of business
or the inability of the Group's debtors to pay monies due. The
economic uncertainty may also have an adverse effect on the banking
industry generally which may affect the Group's ability to obtain
or maintain finance on suitable terms when needed.
Competition
Barriers to entry into the general credit hire and credit repair
markets at a local level are low. Although barriers to establishing
a national or specialist business in this sector are higher, there
is no guarantee that these barriers will remain or will deter new
entrants or existing competitors. In addition, there is the
potential for local operators to overcome these barriers and
establish national networks by forming alliances. Furthermore,
competition could be intensified due to the activity of the Group's
competitors or if insurance companies, brokers and/or providers of
services to motorists or other consumer groups entered the market,
either alone or in collaboration with existing providers. Increased
competitive pressures such as these could result in a fall in the
Group's revenues, margins and/or market share which could cause an
adverse impact on its business, financial condition and operating
results.
Customer and referrer relationships
Business is referred to the Group from a number of sources
including insurance companies, insurance brokers, dealerships and
body shops. The Group has agreements in place with many of these
referrers which govern the flow of cases and the terms and
commissions on which cases are introduced. These agreements are
subject to periodic review, and once out of initial term can be
terminated with short notice periods of typically 3 to 6 months. In
the past, commission rates for new business have risen sharply
increasing the costs of acquiring new business. Commission
increases could adversely affect the Group's business and operating
results. A significant proportion of the Group's business is
referred from insurance companies. If insurance companies were to
withhold business from the Group or credit hire providers generally
or increase their referral commissions, whether alone or on a
concerted basis, the operating results, business and prospects of
the Group could be adversely impacted. Based upon profit
contribution analysis, the Group may decide that renewal terms for
certain existing contracts are uneconomic for the Group and
consequently gross revenues may decline.
Insurance industry protocols
The Group is a subscriber to voluntary protocols developed by
accident management companies and the ABI known as the General
Terms of Agreement (GTA). There is no guarantee that insurers and
accident management companies will continue to subscribe to the GTA
and they may seek alternative arrangements.
Regulation
Certain of the Group's activities and arrangements are subject
to regulation. Whilst the Group seeks to conduct its business in
compliance with all applicable regulations, there remains a
residual risk that regulators will find that the Group has not
complied fully with all such regulations. Failure by the Group to
comply with regulations may adversely affect its reputation (which
could in turn lead to fewer referrals), may result in the
imposition of fines or an obligation to pay compensation or may
prevent the Group from carrying on a part of its business and could
have a materially adverse effect on the Group's business, financial
condition and operating results.
Legal
In the past, legal challenges have been brought on various
grounds (mainly by insurance companies) seeking weaknesses in the
legality of credit hire agreements and the hire rates and the
periods of hire that can be recovered by credit hire companies. A
number of historical legal cases relating to the provision of
credit hire and related services have provided clarity and
precedent. The majority of the Group's claims are now initially
pursued under the terms of the GTA or bilateral protocols with
individual insurers and the Group believes that it operates its
business within the parameters laid down by the reported decisions
of the courts such that its credit hire and repair arrangements are
enforceable. Insurance companies may however bring further
challenges to the legality of credit hire and repair arrangements
or the rates payable.
Recovery of receivables
The business of credit hire involves the provision of goods and
services on credit. The Group generally receives payment for the
goods and services it has provided after a claim has been pursued
against the party at fault (and the relevant third party insurer).
This can mean that the Group can endure a long period before
payment is received. Whilst significant progress has been made
recently in obtaining prompt settlement of claims there is a risk
that the Group will not be able to improve or maintain the pace of
settlement of claims. In addition, third party insurers may seek to
delay payments further in an attempt to achieve more favourable
settlement terms for outstanding claims or, ultimately, to force
the Group and other credit-hire providers out of the market. If the
Group is unable to maintain existing settlement periods, if there
are further delays in the receipt of payments or if settlement
terms with insurers worsen, its business, financial condition and
operating results could be adversely impacted.
Fleet costs and residual values
The cost to the Group of holding vehicles for hire is dependent
upon a number of factors, including the availability of vehicle
finance, the purchase price of those vehicles, the level of
discounts available from dealers and manufacturers, financing costs
(represented by LIBOR and applicable margins), and the expected
residual value at the date of disposal. There is a risk that
changes in any of these factors could mean that the Group's fleet
costs are increased. The Group's fleet management system enables
the business to manage the fleet effectively and maximise the
utilisation of its vehicles in order to minimise the cost to the
business of holding vehicles. Risk is further mitigated by managing
vehicle holding periods.
Operational risks and systems
Operational risks are present in all of the Group's businesses,
including the risk of direct and/or indirect loss resulting from
inadequate or failed internal and external processes, systems, from
fraud or human error or from external events. The Group's business
is dependent on processing a large number of claims and vehicle
hires across the country. The Group's systems and processes are
designed to ensure that the operational risks associated with its
activities are appropriately controlled. If there is any failure,
weakness in or security breach of systems, processes or business
continuity arrangements, the Group's business, financial condition
and operating results could be materially affected.
Liquidity and Financial
The Group has made the decision not to have any committed
working capital facilities at the present time and therefore
manages its existing cash balances and operational cash flow
surpluses to provide working capital headroom. The Group is also
dependent upon the continued availability of both committed and
uncommitted fleet finance facilities to finance replacement vehicle
purchases. In addition the principal financial risks and
uncertainties include capital risk, interest rate risk and credit
risk.
Competition Commission investigation into the private motor car
insurance industry
The Competition Commission ("CC") is currently investigating the
UK private motor insurance market, following a market referral by
the OFT which was prompted by rising car insurance premiums over
the last few years. The OFT last reviewed this area in 2004 as part
of a study into the Association of British Insurers General Terms
of Agreement ("GTA") and concluded at that time that the GTA was
beneficial to consumers. In its latest review the OFT noted that
there was a consensus that credit hire has addressed a gap in the
market, improving the quality of the service that those
not-at-fault drivers receive. At the same time the OFT in their
report recognised that there is no readily implementable,
comprehensive solution available to address the issues that they
identified.
The investigation by the Competition Commission (due to issue
its final report by the end of September 2014) includes scrutiny of
replacement vehicle and repair services such as the credit hire and
repair services supplied by the Group. On 17 December 2013 the
Competition Commission published a report of its interim findings
for further discussion. In this report the Competition Commission
indicated that it had provisionally identified a number of matters
that it regarded as having an Adverse Effect on Competition and
outlined a number of possible remedies for further discussion and
consultation with interested parties. Some of these proposed
remedies, which would require changes in current legislation, could
affect the way in which the Group supplies its credit hire and
repair services in the future The present position is that
motorists who have a non-fault accident have a legal entitlement to
restitution and can utilise the services offered by the Group.
The Group is making representations to the CC in mitigation of
this risk. At the same time the Group has been reviewing its
business model and taking steps to improve the flexibility of the
business model to accommodate as far as can be foreseen any
possible changes in the market that may be consequential upon the
final outcome of the investigation by the CC.
Going concern
The Group's business activities, analysis of its financial
performance and position, and factors likely to affect its future
development, are set out in the Operational and Financial Review
above. The financial resources available to the Group are also
discussed in detail in the Operational and Financial Review above.
The forward risks faced by the Group are also discussed in the
section on principal risks and uncertainties above.
The directors have assessed the future funding requirement of
the Group and the Company, and have compared them to the levels of
available cash and funding resources. The assessment included a
review of current financial projections to June 2015. Recognising
the potential uncertainties surrounding financial projections in
the current economic environment, in particular with regard to the
demand for the Group's services and the cash collection profiles
from insurers, the directors have considered a number of scenarios
and the mitigating actions the Group could take to limit any
adverse consequences.
Having undertaken this work, the directors are of the opinion
that the Group has access to adequate resources to fund its
operations for the foreseeable future and so determine that it is
appropriate for the financial statements to be prepared on a going
concern basis.
Martin Ward Stephen Oakley
Chief Executive Officer Chief Financial Officer
Independent Review Report to Helphire Group plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 December 2013 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
changes in equity, the condensed consolidated statement of
financial position, the condensed consolidated statement of cash
flows and the related explanatory notes. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with the
terms of our engagement. Our review has been undertaken so that we
might state to the company those matters we are required to state
to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules.
The annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2013 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the AIM Rules.
Andrew Campbell-Orde
for and on behalf of KPMG LLP
Chartered Accountants
100 Temple Street, Bristol, BS1 6AG, United Kingdom
27 February 2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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