NAHL PLC
http://www.nahlgroupplc.co.uk/
Brief report of an analyst presentation*
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No bad debts: Not many companies have the cash generative abilities of this company which invoice their customers monthly and get paid twenty days later by Direct Debit. Such an assured cash flow requires a high level of customer trust and either a simple business model or a highly sophisticated IT programme to keep track of the services provided.
Marketing specialists: NAHL Group plc is a leading UK consumer marketing business focused on the UK personal injury market, which advertises for clients through its core brand – National Accident Helpline. Established in 1993, the Group’s business has grown to an industry-leading position as an outsourced marketing services provider. It came to the market in May 2014 which is why this meeting took place.
What does it provide? Well most investors have backgrounds such that if they had an accident leading to personal injury they would know what to do having personally assessed if it was not their fault. However a significant proportion of the population lack the background experience to follow through a personal injury where they think it is not their fault.
However for most the first port of call would be a solicitor who might give an hour or so free to see an injured person and assess their potential to claim damages, and then the solicitor seen may not have the legal experience to handle the claim. In other words both expensive legal time and client time could be wasted because of the problems in matching claim potential with legal expertise.
NALH’s aim is to cut the initial legal costs and help the injured find their way to the right legal help.
What it does by national advertising, with increasing emphasis upon the internet, is encourage those with injuries who believe they have a claim against someone to phone them for help and guidance.
One million people claim for injury each year and even setting aside those related to road traffic accidents, where the insurers are most likely to deal with driver injuries, the potential number of claimants is huge. Currently annually 225,000 people contact NAHL whose skilled staff are able to quickly assess the half who have a potential claim and though a follow up in depth discussion are able to establish sufficient facts which allow one third or thereabouts of all who inquire to be immediately referred to a Law firm. A little over half of those referred result in actual claims. NAHL has a panel of suitable firms, including medical negligence specialists, although it must be added that whilst medical claims tend to have high value they are a very much the minority of claims handled.
A free service: This service costs the client nothing and the Law Firms on the panel do not pay directly per referral, although this does influence the monthly charge. For a legal firm to generate a sustainable high volume of inquiries and then reducing that by two thirds to potential claimants would involve a high fixed cost in promotion, and consume expensive legal time. They save money by outsourcing to NAHL their marketing and in return pay their share of NAHL costs plus a margin for NAHL. The margin earned depends upon the quality and volume of truly potential claimants provided to the Law Firms.
Rather a lengthy explanation of what the business is about but since 2013 the personal injury market is regulated and both the outsourcers and the solicitors have to be LASPO compliant. Regulation has led to a steep cut back in law firms offering injury compensation services and firms marketing for clients. NAHL believes that it has about 4.4% of this fragmented £3bn. market with InjuryLawyers4U and First4Lawyers being the main competitors.
An aspect of the regulation is that claimants do not pay if they lose. Normally automatically claim insurance is taken when a claim is made and pays up if they lose and if they win the cost of that comes from the compensation. Insurance, legal costs etc tends to be limited to a third of the compensation awarded/agreed.
Flotation in May 2014 left just over 80% of the shares in the hands of institutional hands but now provides the VCTs with a way of realising their gains when they wish. Russell and Steve explained in great depth how the firm was cash generative and how essentially its long term success was dependent upon:
• Marketing – the relevance of their message and its placement in a marketplace where potential clients are moving on-line
• The telephone review of the ‘client’ case and the importance of retaining good will when they are advised they may not have a claim
• The quality and volume of referrals to the Law firms to support a high fixed cost national marketing programme and a response call centre service
This AIM company yearend is the calendar year, and its dividend policy is to pay one third in interims and two thirds in finals with two thirds of net profits paid as dividends. Full financial details may be found on the company web site, Sharescope and elsewhere.
Peter T Wilson 10.12.14
Please NOTE THIS IS A DRAFT FOR COMPANY FACTUAL VFERIFICATION
*Sharetalk participants were very grateful to Russell Atkinson, CEO and Steve Dolton, CFO for a comprehensive review of their business after which they were delighted to entertain them to lunch.
SHARETALK (UKSA in the South West) at Didmarton, Gloucestershire 9.12.2014
