A joint venture law set up by listed legal services business National Accident Helpline Group (NAHL) is to close with effect on 2 January, the parent company has announced. In a trading update to the London Stock Exchange, NAHL Group said it had reached an agreement to terminate its relationship in respect of National Law Partners.
The company also announced that, largely due to a deteriorating residential property market, it expects earnings for the year to be below board expectations.
National Law Partners is one of a series of alternative business structures set up by NAHL since 2017. According to the update, the company’s first and largest ABS, Your Law LLP, 'continues to perform well and management are encouraged by the early results from its wholly owned ABS, National Accident Law'.
National Law Partners was a joint venture with Bristol-based firm Lyons Davidson Solicitors. The update states that NAHL will receive £5m over the next three years in payment for historic panel enquiries while registering a one-off provision amounting to £1.16m in the current financial year. 'This settlement avoids a protracted dispute and the prospect of complex and time-consuming litigation between the parties.'
The announcement will prompt questions about NAHL's strategy of setting up legal services businesses to operate in effect in competition with its panel firms in a shrinking PI market.
According to the trading update, NAHL Group's PI division is expected to perform 'marginally ahead of board expectations' and its critical care division remains on target. 'However, in the second half of 2019, the residential property market has deteriorated further and we now expect the division to make a modest loss in 2019. As a result, excluding the aforementioned provision, underlying earnings for the year are now anticipated to be between 5% and 10% below board expectations.'
In half-year results announced in September, NAHL reported profits before tax down 13% to £4.6m. This was largely accounted for by the exceptional £800,000 costs during the period of preparing for small claims reforms coming into force next April.
The company said it expects ‘challenging’ market conditions to persist until the implementation date of PI reforms, which will increase the small claims limit for RTA claims to £5,000 and introduce a set tariff for damages.
NAHL shares rallied to 104p this morning after falling to 102.5p on the announcement. The market closes for Christmas at 12.30 today.