Since listing in 2018, credit hire and legal services firm Anexo (ANX:AIM) has been one of AIM’s success stories, raising guidance five times and this year moving to net cash generation.

The firm’s core Edge business provides replacement credit hire vehicles – both two-wheeled and four-wheeled – to non-fault motorists while their own vehicles were repaired. It also has a legal services division which recovers repair charges and the claimant’s credit hire costs from the at-fault motorist’s insurers.

While lockdown led to lower traffic volumes and therefore lower claims, many of Anexo’s customers are essential workers and although revenue fell dramatically in April they have recovered equally quickly in the last two months and the number of hire vehicles on the road is now above the firm’s own forecast.

Meanwhile, due to a significant reduction in working capital needs during lockdown, net operating cash inflow more than doubled in the first half of the year allowing the firm to continue paying a dividend and reinstate its full year earnings guidance.

Also, thanks to a strong increase in cash collection from insurers, the firm reached its target of net cash generation throughout the first half, fulfilling the promise it made at its initial listing.

This means it can step up its investment both in Bond Turner, its rapidly-expanding legal business, and in specific litigation cases. The number of senior fee earners has risen from 106 a year ago to 137 at the end of June and the opening of the new office Leeds later this year will allow for further growth.

At the same time, the firm has acquired a class action case against German car manufacturer Volkswagen in relation to the issue of vehicle emissions. The number of claimants stands at 10,700 as Edge customers with VW cars have also been signed up, at zero cost.

Earlier this month the UK High Court refused VW leave to appeal against a judgement of liability, and although no liability is established until the trial takes place after March 2022 the firm believes the amount Bond Turner could receive as a proportion of damages and legal costs – although small relative to VW’s total costs – could be transformative for the business.

Analyst Andrew Simms at Arden has a 315p price target and believes ‘growth opportunities through market share gains, increasing services and further investment highlight a group extremely well placed over the next 12 months’.

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