AIMprospector
Event Review continued…
NAHL Group
The internet has empowered individuals to seek advice for legal and monetary redress following personal injury through noninsurance or non-solicitor websites. The best known of these, National Accident Helpline (an NAHL Group business), enables access to justice and compensation for large numbers of the least able in society. The recent government cuts to legal aid have driven more people to claim through NAHL. Overall revenues, mainly income from NAHL’s ‘Panel Law Firms’ (over 85% of revenues), have grown steadily (average +8%) since 2011. Strong cashflows underpin a generous dividend policy, manifested in a chunky dividend yield. The recent acquisition of Fitzalan Partners, a law firm platform specialising in conveyance services and property, provides access to the highly fragmented consumer legal services market. The total market size here is approximately £10bn pa. NAHL Group’s high dividend yield combined with low PE multiple makes the stock a particularly attractive value investment. Broker consensus is for continuing double-digit annual growth coupled with a single-digit PE multiple. The acquisition of Fitzalan will be immediately earnings enhancing and is forecast to add about £3m in revenues and some £700k in EBITDA for 2015.
Fairpoint
Fairpoint Group is the leading UK provider of consumer services in the areas of insolvency solutions (e.g. IVAs), debt and claims management, and (since 2014) legal advice. Despite overall growth, IVA revenues have been in decline for some time, due to lower value agreements and declining fees from new cases. Diversification and acquisitions in high margin debt management services have since helped stabilise group revenues. The 2014 purchase of two legal service firms (Simpson Millar and Foster & Partners) have re-booted revenue growth significantly. More growth is expected in the current year, albeit at lower margin. This segment’s contribution to 2015 revenues and operating profit is expected to be ahead of the 2014 outcome of £25m and £3m respectively. The move into legal practice aggregation in the UK gives Fairpoint access to a new and highly fragmented sector with £10bn in annual fees and growing profits. Fairpoint’s low PE multiple and relatively high dividend yield make it an interesting investment in the current low interest rate environment and ongoing economic recovery.
Fairpoint (LON:FRP) Market cap
NAHL (LON:NAH)
Price (p)
Market cap
£123m
P/E (forecast)
Price (p)
295.5p
Yield (forecast)
P/E (forecast) Yield (forecast)
£55.0m 125.5p 7.0 5.4%
11.1 6.1%
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