NAHL : Interim RNS Statement September 2020

22 September 2020

NAHL Group PLC

("NAHL" or the "Group")

Interim Results

Demonstrating resilience

NAHL (AIM: NAH), a leader in the UK consumer legal services market, announces its Interim Results for the six months to 30 June 2020.

Financial Highlights

• Revenue down 22% to £20.2m (2019 H1: £25.8m)
• Underlying operating profit1 down 43% to £3.7m (2019 H1: £6.5m)
• Profit before tax of £1.8m (2019 H1: £4.6m)
• Basic earnings per share of (0.8)p (2019 H1: 3.4p)
• £0.8m of exceptional costs (2019 H1: £0.8m)
• Free cash flow1 up 585% to £3.8m (2019 H1: £0.6m)
• Net debt1 reduced to £18.5m (31 December 2019: £21.0m)

Operational Highlights

• The Group remained profitable and increased cash flow during the period by prioritising the placement of personal injury enquiries into panel firms to maximise in year revenues and cash flow; and by implementing cost saving measures
• The Group's joint venture and wholly owned law firms continue to mature. Settlements in National Accident Law were up 266% compared to the preceding six months
• The Group restructured, merging the personal injury and residential property businesses into a new Consumer Legal Services division ("CLS"), resulting in the identification of £1m annualised cost savings
• Personal injury enquiry volumes fell rapidly in April as a result of COVID-19 lockdown measures, falling to c. 30% of prior year levels. These have since recovered strongly to c. 50% in June and subsequently to c. 70% in August
• New banking covenants agreed and facility term extended by a year to 31 December 2022

Caroline Brown, Chair of NAHL, commented:

"The first half of 2020 has been the most challenging in NAHL's history and I am very proud of how the Group has responded to the COVID-19 pandemic. We are pleased to report that the business remained profitable and enjoyed strong free cash flow generation in the period.

"I would like to thank our people, who have shown great agility and commitment to supporting our customers in very difficult circumstances."

• The Interim Results include alternative performance measures that provide additional useful information on underlying business trends and performance. These are defined in note 1 to the Interim Results

For further information please call:
NAHL Group PLC	via FTI Consulting
Caroline Brown (Chair)	Tel: [phone]
James Saralis (CFO)
finnCap Ltd (NOMAD & Broker)	Tel: [phone]
Julian Blunt/James Thompson (Corporate Finance)
Andrew Burdis (Corporate Broking)
FTI Consulting (Financial PR)	Tel: [phone]
Alex Beagley
James Styles
Sam Macpherson

1

Notes to Editors

NAHL Group plc (AIM: NAH) is a leader in the 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 and conveyancing services to individuals through Your Law, Law Together, National Accident Law and National Conveyancing Partners. 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.ukand www.national-accident-helpline.co.uk.

2

Interim Management Statement

I am pleased to report the Group's interim results for the six months ended 30 June 2020.

The Group's markets and results for the first half were significantly impacted by COVID-19 ("COVID" or the "pandemic"). Management responded quickly and decisively to the emerging pandemic, implementing the Group's business continuity plan and leveraging technology investments to protect employees and support customers.

The business benefited from profit and cash flows arising from the settlement of historical claims in its personal injury business as well as ongoing cases and existing instructions in Critical Care. By restructuring; reducing costs; and flexing enquiry placement decisions, the Group was able to remain profitable, increase free cash flow and reduce net debt during the period.

Pleasingly, the Group has demonstrated a positive exit trajectory from H1 with growing levels of leads and enquiries in Consumer Legal Services and continued strong billings in Critical Care.

Summary of Financial Performance

Revenue fell by 21.7% to £20.2m (H1 2019: £25.8m) and underlying operating profit decreased by 43.3% to

£3.7m (H1 2019: £6.5m).

Summary of Results		Unaudited
	Unaudited	H1 2019	Change	Change
	H1 2020	(restated)2
	£m	£m	£m	%
Consumer Legal Services	14.5	19.2	(4.7)	-24.7
Critical Care	5.7	6.6	(0.9)	-12.9
Revenue	20.2	25.8	(5.6)	-21.7
Consumer Legal Services	2.5	4.8	(2.3)	-47.5
Critical Care	1.9	2.3	(0.4)	-19.1
Shared Services	(0.8)	(0.7)	(0.1)	+6.8
Underlying operating profit	3.7	6.5	(2.8)	-43.3

(2 The H1 2019 results have been restated to reflect the new structure of the Group. Total revenue and underlying operating profit are unchanged)

The Group incurred £0.8m of exceptional costs in H1 (H1 2019: £0.8m). Of this amount, £0.5m relates to the formation of its wholly owned law firm, National Accident Law ("NAL"), and development of technology to enhance self-processing and remote access capabilities. This transformation is on schedule with 2020 being its final year. A further £0.3m of exceptional cost was incurred in connection with the Group restructure including closure of the London office.

After deducting minority interest payments associated with the Group's joint venture ABS law firms, which are rising as the claims placed into these structures mature, basic earnings per share was (0.8)p (H1 2019: 3.4p). Underlying earnings per share, which excludes exceptional items, amortisation of intangible assets acquired on business combinations and share based payments (net of tax), was 2.1p (H1 2019: 7.4p).

The Board has not reinstated dividends at this time and the Directors have recommended that no interim dividend be paid in respect of 2020.

COVID-19 Response

The national lockdown measures introduced by the Government in March 2020, and subsequently relaxed, had a dramatic effect on our business.

During the pandemic, our priority has been ensuring the wellbeing of our employees and supporting our customers and business partners through these unprecedented times. To that end, during March, our IT and Operations teams implemented continuity plans which enabled colleagues to work safely from home and to

3

provide remote access to patients. Recent investments in technology have allowed us to maintain high levels of service to customers.

In response to the lockdown management took several actions, summarised below.

1. We leveraged the flexibility in our business model to prioritise placement of personal injury enquiries into the panel to maximise cash flow during the period.
2. We implemented measures to reduce our costs, including reducing property and lease costs, introduced temporary voluntary pay reductions for the Board and senior management; and deferred planned pay increases across the workforce.
3. We restructured the Group, merging our personal injury and residential property businesses into a Consumer Legal Services ("CLS") division; and creating a shared services division. Some £1m of annualised savings were identified of which £0.7m have been secured by actions taken in the period, including the closure of our London office.
4. We made use of Government support in the form of the Coronavirus Job Retention Scheme ("CJRS"). At the peak of its usage in May, the Group furloughed 82 staff (30% of total) and in September this had reduced to four staff members. In total, £0.4m will have been claimed between April and the end of the Group's usage of CJRS in September.

Despite the challenges that we faced, we have continued to support our customers and in this period we have helped 21,563 customers with new personal injury claims or conveyancing transactions; issued 556 expert witness reports and initial needs assessments; and provided 1,125 clients with case management to support their rehabilitation.

Trading Review

Consumer Legal Services

This division's markets have been significantly impacted by the COVID-19 pandemic.

Official statistics on the personal injury market are out of date, but we consider survey data from the Office for National Statistics3 ("ONS") on the proportion of adults travelling to work to be an useful guide to model new accident levels in our addressable market. These show 35-40% of adults travelled to work during May, which was the point at which the ONS began compiling the figures, recovering to c. 50% in June and increasing further to c. 60% in September. In April, our personal injury enquiry volumes fell to c.30% of prior year as the UK entered lockdown but had recovered to c. 50% in June as lockdown eased. In August, our volumes recovered further to c. 70%.

Regulatory changes have been subject to further delays and in April 2020 the implementation date for the road traffic accident ("RTA") element of the Civil Liability Act was delayed by eight months to April 2021. This was intended to allow the Government and industry time to focus on their response to the pandemic. To date, there has been no indication of the proposed implementation date for the non-RTA elements of the reforms. The evolving nature of COVID-19 casts some doubt over the eventual implementation date.

Revenue in the CLS division was down 24.7% to £14.5m (H1 2019: £19.2m) and underlying operating profit

was down 47.5% at £2.5m (H1 2019: £4.8m).

Management prioritised placement of enquiries into the panel to generate cash and improve levels of liquidity during this challenging period. Once panel demand was satisfied, we prioritised placement to NAL in order to continue to build scale, in line with our strategy. Enquiries into our joint venture ABS law firms were paused during April and reinstated gradually as lockdown was released.

Following last year's investment in re-platforming the National Accident Helpline website we have experienced improvements in site traffic and click-to-lead ("CTL") metrics, with August seeing the highest CTL since 2017.

The value of ongoing claims processed in the Group's law firms continues to grow. In the period, 5,845 new enquiries (H1 2019: 7,343) were placed into our firms and 2,078 claims were won, a 20% increase on last year. NAL continues to perform well and deliver encouraging metrics. The number of admissions of liability and settlements increased in H1 compared to the previous six months by 62% and 266% respectively, demonstrating an increasing maturity in our business. We intend to place a higher proportion of our RTA enquiries into NAL as the number of enquiries recovers.

After an encouraging start to the year in our residential property business, conveyancing volumes in April came to a standstill, in parallel with the market. Once lockdown measures started to ease, the market recovered quickly and the RICS UK Residential Survey shows strong growth in agreed sales, new instructions and new

4