Anexo’s trading update confirms that FY 2019E adjusted PBT will be in line with market expectations but that forward guidance is withdrawn given the current uncertainty over COVID-19 – although trading so far in FY-2020 looks relatively unaffected. Accordingly, we make no changes to our FY 2019E numbers and withdraw those for future years until the outlook is clearer. The timing of the FY 2019E results announcement will be confirmed in due course. Like others, Anexo is taking measures to preserve cash. Crucially, it continues to operate as an essential business under the current government restrictions. Staff are following the appropriate guidelines while providing a service to many key workers. Obviously, there is uncertainty over the long term impact of COVID-19 and therefore the focus on collections remains vital. In our view, the group remains in a strong position to drive cash out of its backlog of cases without necessarily committing further new working capital.
Key Performance Indicators for FY 2019E confirm the anticipated strong performance and reflect the focus on settling cases and increasing cash collections. Importantly, the credit hire operation has been net cash generative for the first two months of FY 2020E.
As for most companies, cash preservation is key and we note that Anexo has a strong balance sheet and good liquidity. The update reiterates the Group’s financial position and the headroom within its funding facilities. Those attributes will be augmented by the decisions to delay the discussion on any final dividend for FY 2019E and to defer certain cash bonuses to senior Executive Directors. The opening of the Leeds office has also been postponed.
Anexo continues to provide services to many key workers who include couriers and frontline medical and retail staff.
As previously announced, monthly cash collections during H2 2019E exceeded the levels achieved in H1 and the update confirms that monthly cash collections for Q1 2020 saw that trend continue as the Board’s strategy to focus on investment in the legal services division to support cash generation bears fruit.
Given the Group’s focus on driving cash generation, the processing of its significant caseload portfolio by litigators within Bond Turner is being fully maintained by staff who have transitioned to remote working. We view this as an important attribute in the current environment.