An aborted business venture with a claims management company wiped out a leading personal injury firm’s profits for the year.
Accounts for Bristol-based Lyons Davidson, for the year ending 30 November 2019, show the firm effectively wrote off contract costs arising from its broken relationship with NAHL Group, with which it had set up National Law Partners.
The alternative business structure was closed at the start of this year and outstanding claims transferred to Lyons Davidson, with the firm paying a seven-figure sum to NAHL.
In his director’s report to the accounts, managing director Mark Savill said: ‘While it was the right decision to recognise the contract costs for the relationship in our 2019 accounts rather than account for them in future years, we were unable to recognise the balancing value from the assets of the joint venture because of the timing of the transfer.
‘We are however forecasting that the write down will be recovered through fees on the claims referred to us through our relationship and which will bill out in future years.’
Without the costs of ending the agreement, the firm posted pre-tax profits of £4.4m, but after exceptional items this turned into an annual operating loss £2m. Turnover for the year was £36m, compared with £53m for the previous 18-month period.
Improved financial performance had been preceded by a continued overhaul of the business, which resulted in employee numbers falling 9% to 689 and salary costs reduced to £18m. The workforce now consists of 550 professional staff and 139 support staff; in 2015 it had 673 professional staff and 308 support staff.
Since the end of the reporting period, the firm has responded to the Covid-19 pandemic by introducing a four-day working week for a four-month period, following consultation with staff. The firm has also made use of the furlough scheme and reached agreements with landlords as part of its lockdown response.
Savill added: ‘At an operational level, the business has performed well throughout the pandemic and we’ve been impressed with the motivation and energy of our people despite the difficult circumstances. Remote working for all the business has proved a success and has driven efficiencies in several areas between us and business partners, suppliers, and customers.’