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AIMprospector

NAHL: dividends from claims NAHL is the plc behind the National Accident Helpline. The company acts as an aggregated marketer for personal injury lawyers across the UK. NAHL does this through its advertising campaigns, usually fronted by its bandaged mascot ‘Underdog’. There is some unease about this type of business. NAHL’s activities are frequently dismissed as part of a ‘claim culture’ or ‘ambulance chasing’. However, I believe that its core activities are an essential part of the UK’s justice ecosystem.

people lack the confidence to approach a solicitor Much of the population is less familiar with the legal system than the claims management industry’s critics. Many people lack the confidence to approach a solicitor, or may not realise that they have a legitimate compensation claim due to an injury or medical negligence. To a lot of people, the legal profession is frequently alien and remote. To the sort of person typically presenting a claim to NAHL, their understanding of the workings of the law may be limited to its portrayal on television. Lawyers are typically not common or familiar to the kind of person most likely to suffer a workplace injury. 4

apportions its marketing bill plus some margin NAHL’s campaigns provide a familiar and easy-to-understand interface for people with a genuine claim. Without firms such as NAHL, there would be fewer people getting justice. As for the ‘no-win-no-fee’ model, while future regulatory changes are possible, any acceptable alternative would likely result in increases to the government’s legal aid budget. I see little political appetite for that. NAHL applies a series of filters to enquiries before passing the claim to a local lawyer. NAHL apportions its marketing bill plus some margin to its law firm clients. This currently accounts for 87% of group revenues. Just over a quarter of NAHL’s enquiries relate to road traffic accidents (the most controversial claims environment), well below the industry average of more than three quarters. Other revenue comes from what NAHL terms ‘products’. This is a collection of services for client law firms, outsourcing some of their processes to NAHL. Revenues from these additional services have doubled in the last two years. Management expects that there is more potential here, such as insurance (for lawyers, should a claim fail).

The marketing cost that would be required to compete with NAHL, along with the regulated nature of its activities, combine to form a considerable barrier to competition. NAHL’s proven cash generating ability and low debts (net debts under £5m on listing) has led to some tasty dividend forecasts. I expect NAHL to become one of AIM’s high yielding stocks.

a considerable barrier to competition Given the commonplace worries about the claims industry, the rating that the market awards the shares will likely be held back, until the company has proved itself. This could be a great opportunity for investors to secure both an income stream and capital gains. Halfyear results are due on September 25th. NAHL Group (LON:NAH) FOR Dominant market position Strong dividend forecasts AGAINST Unpopular sector More mature health and safety environment could reduce claims in long term. Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£82m 200p:207p 9.4 7.2% 190p:214p

www.aimprospector.co.uk

August 2014 AIM Prospector  
August 2014 AIM Prospector  

Analysis on five AIM-quoted companies: Iomart, Jarvis Securities, NAHL Group, Plastics Capital and Portmeirion