MSL Legal Expenses Ltd - Limited company accounts 18.2

REGISTERED NUMBER: 02210857 (England and Wales)

STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2017

FOR

MSL LEGAL EXPENSES LTD

Page

Company Information

1

Strategic Report

2

to

4

Report of the Directors

5

to

6

Report of the Independent Auditors

7

to

8

Statement of Comprehensive Income

9

Balance Sheet

10

Statement of Changes in Equity

11

Notes to the Financial Statements

12

to

20

DIRECTORS:

N D Garner

A S Hughes

S M Baldwin

SECRETARY:

S A Garner

REGISTERED OFFICE:

No. 1 Lakeside

Cheadle Royal Business Park

Cheadle

Cheshire

SK8 3GW

REGISTERED NUMBER:

02210857 (England and Wales)

AUDITORS:

Allens Accountants Limited

Statutory Auditor and

Chartered Accountants

123 Wellington Road South

Stockport

Cheshire

SK1 3TH

The directors present their strategic report for the year ended 31 December 2017.

REVIEW OF BUSINESS

The company income has increased by 37% in 2017 mainly due to growth and a decision to move the credit hire activity

into the company from MSL Vehicle Solutions Limited, which consolidates all motor claims services in the company.

The company balance sheet reserves increased in 2017 and following a full review of the legal expenses insurance

business the directors will continue to monitor and amend the reserves accordingly. The directors consider the current

level of reserves on the balance sheet to be adequate.

Staffing levels within the company are continually reviewed to ensure maximum efficiency whilst maintaining high

levels of customer service and the average staff numbers reduced to 62 (2016: 66).

The company continues to focus on key areas of income generation and cost control throughout the 2018 financial year

and plan to achieve growth in profits.

Finally, we would like to thank our customers and employees for their ongoing support of the business and their

contribution towards our success.

PRINCIPAL RISKS AND UNCERTAINTIES

Reserving risk

The company adopts a vigilant approach to reserving, ensuring that any assumptions are sufficiently robust to meet its

liabilities. The reserving policy is designed to reduce volatility, with any material changes to reserving policy being

subject to board approval.

Credit risk

The risks considered are that a bank defaults on amounts held for or due to the company. The company's exposure to

credit risk has been assessed in the context of the credit worthiness of the relevant counterparties and is controlled and

managed accordingly.

Liquidity risk

Liquidity is not a significant risk to the company; however due to organic growth the cash flow forecasts show a

requirement for additional funding during 2018, which will be arranged externally.

Future risk

Legislation

The government has introduced the Civil Liability Bill which has commenced its parliamentary passage through the

House of Lords. The Bill is designed to disincentivise minor, exaggerated and fraudulent Road Traffic Accident related

whiplash claims by:

1. the introduction of a tariff of fixed compensation for pain, suffering and loss of amenity for claims;

2. introducing a ban on both the offering, payment and requesting of offers to settle claims without medical evidence;

3. increasing the small claims limit to

a. £5,000 for Road Traffic Accident related personal injury claims; and

b. £2,000 for all other types of personal injury claim.

The changes will have a significant and material effect in relation to the Company's Road Traffic Accident business. The

Company has been aware of and recognised, for some considerable time, this emerging risk and consequently, in line

with its strategic direction the Company is developing potential models for post these changes but the current

uncertainties are such that we cannot provide a definitive indication of the overall likely effect. The effect of the changes

in relation to non Road Traffic Accident business is not considered to be significant.

The earliest date of these changes is April 2019 but the Company suspects that this may be delayed until October 2019

or April 2020 and may subsequently alter dependent on the industry's appetite for developing an alternative claims

framework.

The Company fully anticipates that as a consequence of any changes that it will be able to produce new products and

models within parameters to ensure that access to justice for customers is protected.

FINANCIAL KEY PERFORMANCE INDICATORS

The company turnover increased for the year by 37% to £8.15m (2016: £5.95m).

The profit for the year, after taxation but before dividends, amounted to £0.2m (2016: £0.2m).

The shareholders' funds of the company were £1.3m at 31st December 2017 (2016: £1.2m).

FUTURE DEVELOPMENTS & GOING CONCERN

The financial statements for the company are prepared on a going concern basis in accordance with UK Generally

Accepted Accounting Standards.

The directors have a reasonable expectation that the company has adequate resources to continue in operational

existence for the foreseeable future. The directors have reached this conclusion giving due consideration to the projected

future performance of the company and any potential risk that might impact the company's ability to meet its required

solvency levels. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

ON BEHALF OF THE BOARD:

N D Garner - Director

31 July 2018

The directors present their report with the financial statements of the company for the year ended 31 December 2017.

PRINCIPAL ACTIVITY

The principal activity of the company is the underwriting of legal expenses insurance and associated claims handling

including first notification of loss, personal injury, medical reporting, rehabilitation, credit hire, credit repair and

uninsured loss recovery.

DIVIDENDS

The total distribution of dividends for the year ended 31 December 2017 were £50,000.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2017 to the date of this

report.

N D Garner

A S Hughes

S M Baldwin

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements

in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors

have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not

approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the

company and of the profit or loss of the company for that period. In preparing these financial statements, the directors

are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company's transactions and disclose with reasonable accuracy at any time the financial position of the company and

enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for

safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud

and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have

taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the

company's auditors are aware of that information.

AUDITORS

The auditors, Allens Accountants Limited, will be proposed for re-appointment at the forthcoming Annual General

Meeting.

ON BEHALF OF THE BOARD:

N D Garner - Director

31 July 2018

Opinion

We have audited the financial statements of MSL Legal Expenses Ltd (the 'company') for the year ended

31 December 2017 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in

Equity and Notes to the Financial Statements, including a summary of significant accounting policies. The financial

reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting

Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and

Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2017 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to

you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic

Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors

thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of

assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we

conclude that there is a material misstatement of this other information, we are required to report that fact. We have

nothing to report in this regard.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page five, the directors are responsible

for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such

internal control as the directors determine necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic

alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs

(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those

matters we are required to state to them in a Report of the Auditors 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 and the company's

members as a body, for our audit work, for this report, or for the opinions we have formed.

Paul Wright (Senior Statutory Auditor)

for and on behalf of Allens Accountants Limited

Statutory Auditor and

Chartered Accountants

123 Wellington Road South

Stockport

Cheshire

SK1 3TH

31 July 2018

TURNOVER

3

8,148,552

5,949,294

Administrative expenses

7,838,369

5,639,118

OPERATING PROFIT

5

310,183

310,176

Interest payable and similar expenses

6

97,369

94,066

PROFIT BEFORE TAXATION

212,814

216,110

Tax on profit

7

51,500

30,392

PROFIT FOR THE FINANCIAL YEAR

161,314

185,718

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

161,314

185,718

FIXED ASSETS

Tangible assets

9

111,329

57,021

CURRENT ASSETS

Debtors

10

6,078,349

5,145,377

Cash at bank

161,058

294,681

6,239,407

5,440,058

CREDITORS

Amounts falling due within one year

11

4,041,459

3,481,532

NET CURRENT ASSETS

2,197,948

1,958,526

TOTAL ASSETS LESS CURRENT LIABILITIES

2,309,277

2,015,547

PROVISIONS FOR LIABILITIES

15

1,037,540

855,124

NET ASSETS

1,271,737

1,160,423

CAPITAL AND RESERVES

Called up share capital

16

50,000

50,000

Retained earnings

17

1,221,737

1,110,423

SHAREHOLDERS' FUNDS

1,271,737

1,160,423

The financial statements were approved by the Board of Directors on 31 July 2018 and were signed on its behalf by:

N D Garner - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2016

50,000

924,705

974,705

Changes in equity

Total comprehensive income

-

185,718

185,718

Balance at 31 December 2016

50,000

1,110,423

1,160,423

Changes in equity

Dividends

-

(50,000

)

(50,000

)

Total comprehensive income

-

161,314

161,314

Balance at 31 December 2017

50,000

1,221,737

1,271,737

1.	STATUTORY INFORMATION

MSL Legal Expenses Ltd is a private company, limited by shares , registered in England and Wales. The

company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Going concern

The directors have a reasonable expectation that the company has adequate resources to continue in operational

existence for the foreseeable future and will continue to have the support of the group. The directors have

reached this conclusion giving due consideration to the projected future performance of the company and any

potential risk that might impact the company's ability to meet its required solvency levels. For this reason, they

continue to adopt the going concern basis in preparing the financial statements.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements,

as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 4 Statement of Financial Position paragraph 4.12(a)(iv);

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);

•

the requirements of Section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c).

Consolidated accounts for the ultimate parent of the group, Drive Further Limited, can be obtained from the

company's registered office.

Significant judgements and estimates

Preparation of the financial statements requires management to make significant judgements, estimates and

assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts

reported for revenues and expenses for the year. However, the nature of estimation means that actual outcomes

could differ from those 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 revision only affects that period, or in the period

of the revision and future periods if the revision affects both current and future periods.

The following judgements have had the most significant effect on amounts recognised in the financial statements.

Bad and doubtful debts

A key area involving management judgement and estimate is in determining the provision for bad and doubtful

debts for medical, rehabilitation and hire income debts due.

Legal expenses claims reserve

Management judgement and estimate are significant in determining both the level of claims likely to be received

on the legal expense insurance products sold, together with ultimate costs to be paid per claim.

Turnover

Turnover is measured at the fair value of the consideration receivable and represents the total amount receivable

by the company for services provided in the normal course of business, excluding value added tax and trade

discounts.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures & fittings

-

33% on cost, 20% on cost and 10% on reducing balance

Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment

losses.

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets

have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any

affected asset is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the

carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised

immediately in profit or loss.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate

of its recoverable amount, but not in excess of the amount that would have been determined had no impairment

loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in

profit or loss.

Debtors

Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured

initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective

interest rate method, less any impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits deposits with banks and other

short term highly liquid investments with original maturities of three months or less and bank overdrafts. In the

statement of financial position, bank overdrafts are shown within borrowings or current liabilities.

Creditors

Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are

measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using

the effective interest method.

Interest bearing borrowings

Interest bearing borrowing are recognised initially at fair value less attributable transaction costs. Subsequent to

initial recognition, interest bearing borrowings are stated at amortised cost with any difference between the

amount initially recognised and redemption value being recognised in the statement of comprehensive income

over the period of the borrowings, together with any interest and fees payable, using the effective interest

method.

Financial instruments

Financial instruments are classified and accounted for according to the substance of the contractual arrangement,

as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that

evidences a residual interest in the assets of the Company after deducting all of its liabilities.

The company enters into basic financial instrument transactions that result in the recognition of financial assets

and liabilities like trade and other accounts receivable and payable, loans from banks and other third parties,

together with loans to and from related parties.

Debt instruments (other than those wholly repayable or receivable in one year), including loans and other

accounts receivable and payable, are initially measured at present value of future cash flows and subsequently at

amortised cost using the effective interest method. Debt instruments that are payable or receivable in one year,

typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of

cash or other consideration, expected to be paid or received.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for

objective evidence of impairment. If objective evidence if impairment is found, an impairment loss is recognised

in the statement of comprehensive income.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive

Income, except to the extent that it relates to items recognised in other comprehensive income or directly in

equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance

sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the

lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to profit or loss in the period to which they relate.

3.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

31/12/17

31/12/16

£

£

Principal operating activities

7,516,667

3,929,232

Group related activities

631,885

2,020,062

8,148,552

5,949,294

4.	EMPLOYEES AND DIRECTORS

31/12/17

31/12/16

£

£

Wages, salaries and social security costs

1,784,626

1,784,387

Other pension costs

43,745

94,629

1,828,371

1,879,016

The average monthly number of employees during the year was as follows:

31/12/17

31/12/16

Office and administration

48

50

Sales and marketing

14

16

62

66

31/12/17

31/12/16

£

£

Directors' remuneration

30,312

24,052

Directors' pension contributions to money purchase schemes

-

26,715

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

1

1

5.	OPERATING PROFIT

The operating profit is stated after charging:

31/12/17

31/12/16

£

£

Hire of plant and machinery

1,221

4,028

Depreciation - owned assets

25,280

8,583

Auditors' remuneration

10,833

13,783

Auditors' remuneration for non audit work

-

2,717

Other operating leases

2,746,508

244,868

6.

INTEREST PAYABLE AND SIMILAR EXPENSES

31/12/17

31/12/16

£

£

Bank interest

9,627

3,540

Loan fees and interest

87,742

90,526

97,369

94,066

7.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

31/12/17

31/12/16

£

£

Current tax:

UK corporation tax

39,879

42,309

Adjustment in respect of prior years

-

(16,638

)

Total current tax

39,879

25,671

Deferred tax

11,621

4,721

Tax on profit

51,500

30,392

UK corporation tax has been charged at 19% .

Reconciliation of total tax charge included in profit and loss

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is

explained below:

31/12/17

31/12/16

£

£

Profit before tax

212,814

216,110

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2016 - 20%)

40,435

43,222

Effects of:

Expenses not deductible for tax purposes

10,701

3,808

Adjustments to tax charge in respect of previous periods

-

(16,638

)

Change in corporation tax rate

364

-

Total tax charge

51,500

30,392

Factors that may affect future tax charges

Following Budget 2017 announcements, there will be a reduction in the rate of corporation tax for future years,

resulting in the following rates applying:

17% from 1 April 2020

8.

DIVIDENDS

31/12/17

31/12/16

£

£

Interim

50,000

-

9.	TANGIBLE FIXED ASSETS

Fixtures

& fittings

£

COST

At 1 January 2017

124,051

Additions

79,588

Disposals

(11,260

)

At 31 December 2017

192,379

DEPRECIATION

At 1 January 2017

67,030

Charge for year

25,280

Eliminated on disposal

(11,260

)

At 31 December 2017

81,050

NET BOOK VALUE

At 31 December 2017

111,329

At 31 December 2016

57,021

10.

DEBTORS

31/12/17

31/12/16

£

£

Amounts falling due within one year:

Trade debtors

3,497,491

1,758,749

Amounts owed by group undertakings

2,199,454

2,829,434

Other debtors

30,891

10,100

Prepayments and accrued income

350,513

247,094

6,078,349

4,845,377

Amounts falling due after more than one year:

Amounts owed by group undertakings

-

300,000

Aggregate amounts

6,078,349

5,145,377

Movements on provisions for doubtful debts resulted in a charge of £863,820 (2016: charge of £182,650) to the

statement of income.