Slower-than-expected rebound in PI claims hits listed business

Saralis: Targeting long-term growth

A slower-than-expected return to pre-pandemic personal injury (PI) claim levels and the decision to put more cases through its own law firm will hit NAHL plc’s turnover and profit this year, the company said yesterday.

As a result, the AIM-listed company’s share price dived 17% even though the company, which owns National Accident Helpline and the alternative business structure (ABS) National Accident Law (NAL), recorded respectable half-year results.

For the first six months of 2021, NAHL’s revenue was £19.5m, down 3% on the same period last year, but it turned a £400,000 loss into a £600,000 profit before tax. Net debt was reduced by £1.4m to £14.9m.

Investors were told that Google data showing the relative number of people on public transport and in workplaces, ended the six months at 60-70% of pre-pandemic levels, which “broadly” correlated to the volumes it saw.

The PI business generated 14,141 vetted enquiries in the period – 26% fewer than the same period last year and 17% fewer than the second half of 2020.

“This reflected the reduction in accident numbers in the market since the start of the pandemic,” said group chief executive James Saralis.

“Last year, the recovery in enquiry numbers that we enjoyed over the summer stalled once the UK went into the second national lockdown and that continued into the third lockdown from the start of 2021.”

Some 2,807 enquiries were sent to NAL, an increase of 80% on H1 2020 and 30% on H2. Of these, 85% were converted into claims and, as at 30 June 2021, NAL was working on 4,268 ongoing claims, an increase of 43% in six months.

“We estimate that the unrecognised profits on these claims, after deduction of processing costs, will amount to £4.6m when the claims are concluded.

“In addition to this, we estimate that the unrecognised profits on open cases in our joint-venture law firms, after deduction of any profit attributable to non-controlling interests and processing costs, will amount to a further £2.3m.”

NAHL’s long-term growth strategy is predicated on generating higher profits and cash per claim by processing more claims in NAL, but because of the working capital demands this creates, it uses its traditional panel firms and the two joint venture ABSs it has with NewLaw Solicitors and Horwich Cohen Coghlan to spread the load.

Mr Saralis explained: “With the lower enquiry volumes due to Covid-19, the board had the choice between diverting enquiries to the panel to generate more immediate revenues, profit and cash flow in the remainder of this year, or to follow our strategy by processing an increasing number of enquiries in NAL to generate long-term growth in profits and cash flow.

“We have chosen the latter as we believe this will generate more value for our shareholders in the long-term.

“The consequence of slower growth in the number of enquiries due to the continuing impact of the pandemic, and our decision to grow the number of enquiries placed into NAL, is that our revenues and profits for 2021 will be lower than we had anticipated earlier in the year and we now expect these to be less than last year.

“However, we still expect to generate a profit before tax in the year and to increase the value of our book of ongoing claims in NAL.”

The group’s free cash flow fell from £3.8 in H1 2020 to £1.4m this year as a result.

The profits attributable to the joint ventures fell 26% to £1.7m, in part because the number of new enquiries placed with them was cut by 85%.

Mr Saralis told Legal Futures that new enquiries have continued to increase since, “but it’s slow – it’s not the rapid rebound we saw last summer”.

NAL is now processing all road traffic claims the group receives and, since 1 July, an increasing number of other PI claims.

It is currently working on around 1,500 claims caught by the new Official Injury Claim portal, around 30% of which have so far had an admission of liability. Mr Saralis said that “only a minority of customers” are currently using its digital platform to process their whole claim online.

In total, 20% of new enquiries were placed into NAL during the six months, compared to 10% in 2020.

The group has previously announced its intention to offload its residential property business, made up of Homeward Legal, which generates conveyancing leads, and Searches UK.

Mr Saralis said: “Following a review of the market, the board has determined that conditions are not conducive to realise full value from a sale of Searches UK, but this position will be kept under review. Negotiations regarding the sale of Homeward Legal are ongoing.”

NAHL’s critical care division, Bush & Co, has completed the build of its proprietary report writing tool, designed to streamline the production of expert witness reports, and soft-launched Bush Care Solutions, which will directly provide clients with care packages, in conjunction with an associate case manager or deputy, rather than referring them to a third-party provider.

Bush & Co is also looking to expand into “adjacent markets”, Mr Saralis said.

“Our differentiated proposition, called Hubs, is targeted at serious claims valued between £100,000 and £500,000 and is progressing well.

“Originally planned for launch in 2022, the team have made excellent progress and are in discussions with several potential customers. We plan to conduct a pilot of this proposition later this year.”

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