[1]Davison: encouraging signs
Lewis Hymanson Small (LHS) – the earlier this year – made a small dent in the company’s profits during a “tough” initial period, Abbey’s half-year results have shown.
The purpose of the acquisition was to expand Abbey’s legal services offering and in the first four months of being part of the group, LHS contributed £760,000 of revenue and a loss of £55,000.
The interim report said that Abbey’s investment in the opportunities afforded by its alternative business structure licence is “yet to bear fruit”.
Chief executive Colin Davison said: “Trading in this initial period has, as expected, been tough as we have been undertaking the necessary re-structuring to ensure that LHS is well positioned to take advantage of the opportunities in front of us. I am pleased to say that the signs are encouraging.”
Overall the legal arm of Abbey, which includes LHS and its legal advice call centre, saw revenue grow nearly 3% to £5.1m, although profits were flat at £1.2m.
The report also revealed that Abbey paid £946,000 for a controlling interest in the Manchester practice, made up of £296,000 cash and £650,000 in deferred consideration.
Included within the latter is contingent consideration with a fair value of £266,000. This arrangement requires Abbey to pay the former owners a percentage in excess of an annual profit target, in respect of the period from acquisition on 28 February 2013 to 31 December 2015.
The report said: “The potential undiscounted amount of future payments that the group could be required to make under the contingent consideration arrangement is between nil and £750,000.”
The valuation of LHS included goodwill of £1.36m, which is “largely attributable to the anticipated profitability of the group’s products in the new markets and the anticipated future operating synergies from the combination”.
Group revenue was up 8% to £20.7m for the first six months of 2013, with profit after tax up 6% to £4.2m – although pre-tax profits remained stable at £5.2m.
Abbey’s after-the-event insurance division more than doubled its profit contribution to £500,000 with a “sales boom” in March ahead of implementation of the Jackson reforms. The historic Accident Line scheme is now in run-off, but Abbey remains “active” in the market.