Shares in the AIM-listed personal injury group, NAHL, experienced a dramatic fall of 15% following the group’s announcement of a substantial reduction in revenue and profit forecasts for the year.
The decline in share value is primarily attributed to diminishing demand from NAHL’s panel of law firms and escalating costs associated with Google acquisition. These factors have been highlighted as the main contributors to the adverse financial outlook.
NAHL operates through three channels to manage leads generated by its marketing arm, the National Accident Helpline (NAL): its own alternative business structure (ABS), the joint venture ABS ‘Law Together’ with Horwich Cohen Coghlan of Manchester and Birmingham, and its traditional panel of law firms. By placing leads with the panel, cash flow is enhanced as the group receives payment without waiting for case completion. However, sustaining growth within NAL remains a strategic priority for the company.
Chairman Tim Aspinall addressed the company’s annual general meeting, noting that NAL has shown positive performance this year, settling 19% more claims than the previous year, with cash from settlements rising by 56% to £3.3 million. Despite this, NAHL intentionally lowered its inquiry volume by 30% in the first quarter to align with the expected reduction in panel demand, leading to a decrease in revenue, partly mitigated by a 45% reduction in marketing expenditure.
During the second quarter, NAHL faced a sluggish recovery in panel demand, prompting a shift to place more work with the joint venture, Law Together. Concurrently, a shift in Google’s organic search algorithm significantly increased the cost of paid searches, forcing NAHL to maintain competitive positioning at a higher expense. This adjustment nearly doubled the average cost of inquiry acquisition in the short term.
By May 2024, NAHL had generated approximately 9,700 inquiries, a 33% decrease from the previous year. The expectation of normalised volume, cost, and panel demand levels by June and July is not anticipated to fully materialise, with present data suggesting a slower recovery and prolonged higher costs.
Despite these challenges, the board remains optimistic about overcoming these hurdles, projecting a break-even for the personal injury business in 2024. However, revenue and profit forecasts for the year remain significantly lower than initially expected, inevitably impacting market expectations.
NAHL has also publicised its consideration of selling its critical care division, Bush & Company Rehabilitation, revealing a promising level of initial interest. After a significant share price increase in 2023, which saw shares reach a peak of 77p last month, recent declines have brought the value down to 56p.
The obstacles faced by NAHL underline a challenging period for the group, with external and internal pressures influencing financial forecasts and market performance.
