Slater & Gordon share price continues to plummet, while UK-listed PI businesses also hit
Stock exchange: AIM shares fall
Slater & Gordon’s share price continued to tumble in the wake of the Autumn Statement, with another 27% wiped off their value overnight, while National Accident Helpline has also taken a big hit on AIM.
The two listed UK alternative business structures with exposure to personal injury have fallen as well – albeit less precipitously – with Fairpoint saying it was “well positioned to take advantage of these market changes”.
National Accident Helpline, which was 390p on Wednesday morning, closed yesterday at 295p, a fall of 24%.
In a statement to the market, it highlighted its recent acquisitions of rehabilitation provider Bush & Company and Fitzalan Partners, a conveyancing leads business, neither of which were impacted by the changes, it said.
“[These] have already diversified the group’s model and management will continue to consider further opportunities that are available in the market to continue this diversification.
“NAHL is the market leader in PI, has a robust business model and is well positioned to adapt to proposed regulatory changes, which it has done a number of times in the past.
“There will remain a significant market for claims valued below £5,000 and the group’s PI subsidiary, National Accident Helpline, is ideally positioned to assist consumers in processing those claims going forward.
“There may be potential to further accelerate industry consolidation meaning that more competitors are removed from the market, leaving NAHL in a stronger position to grow its market share with higher-value claim enquiries.”
Slater’s drop is on top of an initial 50% fall. The Australian-listed law firm stock is now priced at an all-time low of A$0.69, having started the week on A$2.65 and been nearly A$8 earlier this year.
According to the Sydney Morning Herald, the company’s market capitalisation is now about A$244m (£117m), down from A$944m last Friday, and well off its peak of A$2.7bn in June.
The initial blow was caused by last Friday’s announcement that the firm was likely to miss its cash flow target, but the personal injury reforms announced by Chancellor George Osborne have sent the shares into freefall.
Slater & Gordon told the stock exchange yesterday that the reforms would not have an impact on its forecasts for its 2016 financial year, which ends on 30 June 2016, but analysts are expecting them to take a heavy toll thereafter.
Deutsche Bank analyst Dominic Rose was quoted in The Australian newspaper as saying that a “bear case” scenario would see the reforms wipe out 27% of Slater & Gordon earnings before interest, tax, depreciation, amortisation and write-offs.
The Sydney Morning Herald said Macquarie researchers were concerned about the level of company debt. They said: “The proposals put forward, if implemented, would in our view have a significant impact on the earnings generation capability of the UK operations.
“With over A$650m net debt [taken on to fund the acquisition of Quindell’s professional services division], Slater & Gordon’s balance sheet position in our view does not afford much flexibility to withstand a significant earnings hit.”
However, Morgans analyst Alexandra Clarke told The Australian that while the announcement created uncertainty, the firm “has proven over the years its ability to adapt and benefit from legislative change”.
The Australian Financial Review, meanwhile, reported: “It is believed the company’s banks remain firmly behind the company.”
The two AIM-listed UK alternative business structures in the personal injury market have seen their shares fall too.
Redde, the accident management company that owns NewLaw Solicitors, has gone from 168p ahead of the Autumn Statement to a low of 139p this morning, but at the time of writing (2pm) had rallied to 153p.
In a statement to the market, Redde warned that “a broad brush approach” to reduce insurance fraud that would also “prevent genuine claimants seeking rightful redress would meet with resistance from many champions of consumer rights”.
It continued: “Redde, through its legal firm NewLaw, represents genuine claimants who have suffered significant injuries, pain and suffering and have a legitimate right to make a claim. Redde supports the efforts of insurers to eliminate fraud and notes that the majority of the cases handled by NewLaw are handled on behalf of insurers and brokers.
“Redde notes that at this stage none of the detail of any proposals will be known until full consultation has taken place and believes that to achieve the government’s stated aims there would need to numerous fundamental, time-consuming, far-reaching legislative changes.
“Redde further notes that the activities of the group which would be covered by legislation of the sort proposed by the Chancellor contribute less than 2.5% of the group’s revenue.”
Fairpoint, which owns Simpson Millar and Colemans-ctts, was 190p on Wednesday morning, but is trading at 175p this afternoon, up on the day.
In a statement to the market, it said: “The notion of extending the small claims limit has been a topic of debate for some time and following the acquisition of Colemans LLP and its class-leading legal processing centre in August 2015, the group has an operational capability designed specifically in anticipation of such changes.
“As such the group is well positioned to take advantage of these market changes.”
A petition calling for to maintain the small claims limit at £1,000 has been started on the government’s petition website here. At the time of writing, it had 7,740 signatures, and needs 10,000 to trigger a government response and 100,000 to make it eligible for a parliamentary debate.
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