Legal services marketing giant NAHL is to create a third alternative business structure (ABS) this year, which will focus on helping injured people navigate small claims if and when the government’s whiplash reforms happen in April 2019.
The news comes against the background of its 2017 annual results, which showed revenue up 2.5% to £52m but underlying operating profit down 19% to £14.5m – which NAHL said was anticipated and due to the money it has spent to invest in the first two ABSs as it reshapes its business model due to previous and future personal injury reform.
This has also hit dividends, with the recommended final dividend of 10.6p, providing a total dividend for 2017 of 15.9p, down from 19.05p in 2016.
The company – which owns National Accident Helpline – has also warned of the continuing impact of investment on profits and dividends over the next two years.
Last year, NAHL launched its first two ABSs, which act as regular panel firms: Your Law, in association with NewLaw Solicitors, and National Law Partners, in partnership with Lyons Davidson. The increase in work in progress on NAHL’s books was the main reason for the lower profits.
The report to investors said: “Our first ABS [Your Law], now in its eighth month of operation, is already profitable month-on-month and has covered its projected fixed costs for its first full year of operation.
“Importantly though, we are also identifying ways of improving ABS profitability through a range of initiatives to improve processes and, ultimately, returns.
“We have consequently further refined our business models and we are now confident that we understand how to manage the financial impact that changes to the small claims limit and whiplash reform will have on our business.”
NAHL chairman Steve Halbert said the third ABS – which will be unveiled later in the year – “will be small claims ready, and will in due course provide digitally enabled consumer advice and support”.
This is in anticipation of assisting litigants in person once the small claims limit for personal injury is raised to £5,000 for road traffic accidents and £2,000 for all other injuries.
He said set-up costs, including capital expenditure, are expected to amount to approximately £4m during the next two years “and will comprise investment in people, technology and process capability”.
The report to investors said NAHL expected “a progressive reduction” in panel law firms’ appetite for smaller-value cases. “[But] handled correctly, we believe that they still offer NAH a valuable opportunity to leverage its twin attributes of process efficiency and empathic customer focus.”
Speaking to Legal Futures, chief executive Russell Atkinson confirmed that this would in essence be a technology-enabled self-serve model with back-up support from lawyers where required.
The report said it anticipated that there were fewer road traffic accident claims last year “caused by the cumulative impact of prior legislative change which has resulted in reduced marketing activity”.
Similarly, the reduction in claims management companies – from a peak of 2,500 in 2011/12 to approximately 670 last year – “has depressed demand in the market as a whole for the traditional panel model and we expect this trend to continue”.
But Mr Atkinson said he expected the panel to remain integral to the company’s operations.
NAHL’s residential property division recorded revenue down 7.5% to £8.3m, with operating profits unchanged at £1.4m, against a background of falling conveyancing transactions last year.
Mr Atkinson added: “We are particularly pleased to have successfully delivered the key elements of our PI strategy with the launch of two ABS ventures, the relaunch of our brand and the delivery of an improved digital capability.
“These initiatives have given us the insight and experience to lay out a confident vision for the future.”
The investment NAHL was making “creates a platform for growth that will enable us, over time, to transform the consumer’s journey from initial contact to settlement, modernising the experience and offering a more efficient digital proposition combined with the service approach for which we are already acknowledged”, he said.