14 March 2017
NAHL Group PLC
("NAHL" or the "Group")
Update on Ministry of Justice Proposals
NAHL (AIM: NAH), the leading UK marketing and services business focused on the UK consumer legal market, today provides an update on the recent Ministry of Justice ("MoJ") proposals, announced as part of the Prisons and Courts Bill.
In February 2017 the Government published its response to the consultation it first announced in November 2015. The response outlined two key outcomes: firstly that it will seek to restrict compensation for sufferers of minor whiplash injuries to small pre-defined amounts depending on length of injury; and secondly it will raise the upper limit for the small claims track for RTA claims from £1,000 to £5,000 and for non-RTA claims to £2,000. The new regulatory regime is scheduled to take effect from October 2018 although there remain a number of unresolved important points on which the Group awaits clarification.
Whilst, from a non-RTA perspective, these changes were lower than had been proposed, they still represent a fundamental change for the PI market as a whole which will lead to significant changes in the way many PI claims are processed.
The Board estimates that historically less than 30% of total enquiry volumes generated through our PI division will fall below the new thresholds and have to be processed through the small claims track. Our approach to processing these particular claims will require further refinement and a pricing adjustment for those claims that will be subject to lower settlements.
We remain in close contact with our Panel Law Firms (PLFs), as we have done since the regulatory changes were first proposed in 2015. The discussions we have had with them, as well as the results of the trials conducted on a proportion of our case volumes, lead us to conclude that we should continue with the strategic decision we took in 2016 to invest in a proportion of our enquiries through different commercial and structural arrangements to those we normally deploy. This involves us playing a more proactive role in the entire conduct and financing of a PI case. We are committing further investment through 2017 resulting in a deferment of profit and cash flow, which will be realised in the future as cases settle. We plan that this will be a continuing feature of National Accident Helpline's business. The outcome of these initial trials has proved very encouraging and we are progressing these arrangements, which are being conducted with a number of the larger law firms in the PI market, into longer term agreements.
Going forward we will have the flexibility to handle enquiries that we generate in a number of ways:
1. Utilising our traditional panel model to provide services in support of generating and triaging enquiries
2. Offering deferred enquiry payment terms to selected PLFs to support incremental volumes
3. Investing in cases using Alternative Business Structures (ABS)
ABS' allow NAHL to have an ownership interest in a company providing legal services. This enables the Group to enter into a form of joint venture arrangement with a law firm to fund that venture and take a share of profit from work processed by the ABS.
As previously announced, given the increased investment necessary for funding cases, an element of profits will not be recognised upfront and some of the cash will not be received until cases are settled. Both profits and cash under the ABS will normalise over time as cases settle. Average case settlement times are around 18 months and when the growth we expect in volumes is taken into consideration, we anticipate that it will take some time to reach maturity for both profits and cash under this new arrangement. Along with a short term impact on operating profit, cash generation is likely to significantly reduce in 2017 and 2018 before returning to levels previously achieved.
Despite the increased investment and deferred profits, the Board still intends to maintain the Group's policy of 1.5x dividend cover.
The deployment of these structures will allow us to manage the forthcoming period of demand uncertainty whilst enabling us to grow market share through brand investment and optimise our returns.
The Group has been planning for these changes since the initial proposals were announced. Whilst there is no doubt there will be some uncertainty in the short to medium term as all market participants reflect on the proposals, we are committed to maintaining both our market leading position and our relationship with our PLFs. The Board remains encouraged about the medium and long term opportunity that the new regulatory environment will present to our PI division.
For further information please call:
NAHL Group plc Russell Atkinson (CEO) Steve Dolton (CFO) |
via FTI Consulting Tel: +44 (0) 20 3727 1000 |
Investec Bank plc (NOMAD & Broker) Garry Levin David Flin James Ireland David Anderson William Godfrey |
Tel: +44 (0) 20 7597 5970 |
FTI Consulting (Financial PR) Oliver Winters Alex Beagley James Styles |
Tel: +44 (0) 20 3727 1000 |
Notes to Editors
NAHL Group
NAHL Group plc is a leading UK consumer marketing business focused on the UK legal services market. The Group comprises three companies: National Accident Helpline (NAH), Fitzalan Partners (Fitzalan) and Bush & Company Rehabilitation (Bush). NAH provides outsourced marketing services in the personal injury market, Fitzalan, which includes Searches UK, a leading conveyancing search provider, provides marketing services in the property market and Bush provides a range of specialist services in the catastrophic injury market.
More information is available at www.nahlgroupplc.co.uk and www.national-accident-helpline.co.uk.
