NAH issues profit warning as third ABS receives green light

Atkinson: Strong progress in PI transformation agenda

NAHL plc, the company behind National Accident Helpline and co-owner of two alternative business structures (ABSs), failed to meet its financial targets last year, it told investors today in a profit warning.

However, the Solicitors Regulation Authority (SRA) has approved its application for a third ABS, and the firm it will own 100%, which will be a ‘small claims ready’ law firm aimed at the whiplash reforms set to come into force in April 2020.

In a trading update issued this morning, it said a “disappointing end” to the year meant profits and adjusted earnings per share for the 2018 financial year were expected to be between 5% and 10% below board expectations.

“The personal injury (PI) division has seen an ongoing decline in panel law firm demand as a result of the forthcoming regulatory changes.

“In addition, the residential property division continued to be impacted by the state of the housing market.”

NAHL’s share price has been suffering through 2018, as our analysis of listed legal businesses published earlier this week showed.

Back in October 2015, it reached a peak of 404p. After a poor 2016, NAHL’s share price recovered somewhat in 2017, ending the year 21% up at 165p. However, it closed 2018 35% down at 107.5p.

As as 12.30pm today, the share price had dived 16% from 111p yesterday to 93p.

NAHL said that, in the last quarter of 2018, “heightened competitor activity in the PI division depressed enquiry volumes and increased consumer acquisition cost”.

It went on: “Based on previous year’s performance, we believed that the division’s performance during December would mitigate this trend, although this proved not to be the case. This, coupled with a persistently difficult housing market, has resulted in a 2018 performance below expectations.”

To address its competitive position, NAHL would invest in brand recognition and further digital marketing activity in PI, “although we recognise that the competitor landscape may continue to be challenging”.

NAHL said it was nonetheless “well positioned” to capitalise on whiplash reforms: “The group’s PI transformation programme is progressing well, including our ABS ventures which are trading profitably.

“The group has received notification from the SRA that its ABS application for a wholly owned law firm will be granted, which is a major step forward in NAHL’s transition strategy.”

The current ABSs, which act as regular panel firms, are Your Law, in association with NewLaw Solicitors, and National Law Partners, in partnership with Lyons Davidson.

NAHL told investors that it has continued to carefully manage its balance sheet and net debt at the end of 2018 was £15.5m, which was lower than expected, while the critical care division was trading in line with the board’s expectations.

CEO Russell Atkinson said: “Progress in critical care has been encouraging and, although market conditions have challenged our residential property business, we have plans in place to return to growth.

“Despite a disappointing December, our personal injury business continues to make strong progress in its transformation agenda and our focus remains the creation of a market leading enquiry generation and volume processing business.”


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