Leading claims management company National Accident Helpline today issued a profit warning to the stock exchange after a ‘disappointing’ end to 2018.
The listed company reported to the markets that profit and earnings per share for the 2018 financial year are likely to be between 5% and 10% below expectations.
The announcement sent the value of the company tumbling, with NAHL Group shares dropping more than 20% this morning.
NAHL said its personal injury division has suffered an ongoing decline in demand from panel law firms as a result of forthcoming regulatory changes. In addition the residential property division has continued to be affected by fluctuations in the housing market.
The announcement goes on to explain that in the fourth quarter of 2018, ‘heightened competitor activity’ in the PI market depressed enquiry volumes and increased the cost of aquiring claims.
Based on previous years’ experience, the company believed that performance during December would mitigate this trend, but this proved not to be the case.
Chief executive 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.’
NAHL has set out plans for 2019 to invest further in brand recognition and digital marketing to improve competitiveness in PI, and to implement several new initiatives for reviving the property division.
The group says its net debt at the end of 2018 was £15.5m, which was lower than expected.
In the past two years, the company has set up alternative business structures with two existing law firms, and it was confirmed that the SRA has given notice that an application for a third wholly-owned law firm will be granted permission.
The company's declining demand from panel law firms is a sign of the PI market contracting in advance of the Civil Liability Act coming into force. As of April 2020, claimants will be unable to recover costs on any soft injury RTA claim worth less than £5,000. Even if claimants do seek legal representation for these lower-value cases, the dramatically reduced damages under the new tariff is likely to result in much lower legal costs.
In September, NAHL reported to the London Stock Exchange that its underlying operating profit for the first half of 2018 was down 12% to £6.4m. The business also posted static revenue of £24.9m for the six months ending 30 June.