NAH records strong 2015 but warns that PI reforms will squeeze profits
Atkinson: 2015 was significant year for NAHL
NAHL Group plc – the AIM-listed business that owns National Accident Helpline – has announced strong results for 2015, but warned that impending government reforms to personal injury (PI) claims are likely to hit profits in the current financial year.
Meanwhile, the Solicitors Regulation Authority (SRA) has issued a warning notice about PI fraud and the steps solicitors should take to avoid it.
NAHL saw revenue up 16% to £51m in 2015, delivering an increase in profit before tax of 16% to £14m. Earnings per share increased 24% to 25.6p.
Most of the group’s income is derived from its core personal injury marketing business, but it has been diversifying with the acquisition of conveyancing marketing companies Fitzalan Partners and Best Value Conveyancing, along with leading rehabilitation provider Bush & Company. The acquisition of Searches UK came after the year-end.
Fitzalan contributed profit before tax of £800,000 from revenue of £3.5m, while Bush delivered £2.1m in revenue and £600,000 profit.
NAHL chief executive Russell Atkinson described 2015 as a “significant year” for the group, “which saw us become a broader, more diversified business while delivering a strong financial performance in terms of revenue, profitability and cash generation”.
He continued: “Whilst NAH performed well and the strategic focus on higher-quality, lower-volume enquiries meant the business was able to deliver an increase in gross profit margins, the short term impact of the government’s proposed changes relating to small claims limits is likely to lead to reduced demand levels from panel law firms. Therefore NAH anticipates generating reduced volumes of enquiries in 2016 and subsequently, a contraction in its profits.
“However, the continued strong performance of Bush and Fitzalan, as well as the strategic focus within NAH on higher-quality claims, means we expect to deliver earnings growth in the current financial year for the group overall, albeit marginally below market expectations.
The stock exchange announcement added: “As the market leader today with a predominant focus away from lower-value RTA claims, NAH is well positioned to remain at the forefront of the market change. We intend to continue to work with stronger, more process-focused panel law firms on higher-value cases. For lower-value cases, we will explore with vigour the new business opportunities that will emerge, once we have more certainty on the regulatory backdrop.”
The SRA warning notice is its first tangible response to the report of the Insurance Fraud Taskforce in January, and lists those areas where it says there may be concerns for PI solicitors, particularly where work referrers are involved.
These are: allowing third parties to cold call potential clients; entering into illegal referral agreements; acting on instructions from third parties without ensuring they originate from the client; paying damages or sending cheques to third parties without accounting properly to the client; bringing claims without the clients’ authority; and “in some extreme cases”, bringing claims without the knowledge of the named client.
On instructions, the guidance says: “In those cases where your client clearly wishes – and confirms to you directly – that you should act on instructions given by a third party, you will need to satisfy yourself that it is in your client’s interests to take instructions in this way.
“You will need to explain to the client that taking third party instructions will mean the sharing of their confidential information and the implications and risks involved, eg inaccurate information being acted on, misuse of information by the third party. Only if you are satisfied that the arrangement is in the best interests of the client and that there is no conflict between the interests of the client and the person giving instructions may you act in this way.
“You should be mindful of any arrangements which may incentivise the referrer to take a particular course of action in the case, for example an early settlement, without regard to the best outcome for the client.
“In personal injury matters the best information on the facts and consequences of the injury are highly likely to rest with the client. Blanket forms of authority based on bulk or standard terms present a greater risk to the interests of clients and the administration of justice, and are highly unlikely to satisfy our requirements.
“Even where you are satisfied it is in your client’s interests to take third party instructions, you must be satisfied that your client has given free and informed consent to you doing so. Once again this is likely to require you to obtain this direct.”
The SRA is also carrying out a “comprehensive” review of the PI market this year.
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