Moat: considerable opportunities within the legal services marketplace
Two listed companies that own significant alternative business structures (ABSs) – Redde and Fairpoint – both announced strong results to the stock exchange today.
Turnover at accident management group Redde, which owns NewLaw Solicitors, was up 26% to £249m, while gross profit nearly doubled to £23m.
This partly reflected the full-year contribution of NewLaw, which itself is a minority partner in five joint venture ABSs with the likes of insurer Ageas.
The report to the stock exchange said: “NewLaw and its associated businesses have made an encouraging contribution during the first full year since acquisition and have performed in line with our expectations.
“During the year NewLaw was awarded the contract to manage an ABS with the British Medical Association under the name of BMA Law. A number of additional ABS opportunities with insurer and other prestigious brands are in the pipeline and in the process of delivery. This together with the growth in cases sourced directly by NewLaw gives the Board confidence for the future in this area.
“Principia Law, our other legal services business [and ABS], has continued to make good progress as it emerges from its start-up phase in the area of personal injury cases and has also provided the group with additional opportunities in relation to credit hire recoveries, particularly those cases requiring more specialist attention.”
The report explained that Redde has entered into “a growing number of bilateral protocol agreements with insurers who have confidence in the representations made on claims to be settled”, meaning they settle more quickly.
Redde CEO Martin Ward said: “The group has continued to make very good progress and remains well positioned, with the funds available, to support further growth. Our ‘GPS’ strategy – growth, profitability and sustainability – launched in 2013, is gaining further momentum with a growing pipeline of new business.
“The group has again exceeded performance expectations delivering a robust, profitable and cash generative result which continues to sustain attractive dividends.”
Meanwhile, Fairpoint – which owns Simpson Millar and last month acquired Colemans-ctts – announced that revenue for the first half of 2015 was up 64% to £23m, with gross profit up 21% to £4.1m. It bought Simpson Millar in June 2014.
Legal services accounted for £11.3m and £1.4m of the profit, which amounted to single-digit growth compared with Simpson Millar’s performance in the first half of 2014 pre acquisition.
Fairpoint said its “mission within legal services is to make law more accessible to consumers” and as part of this it has introduced fixed fees for over 70 “legal products”.
The company told investors that it was in a “strong position to continue to develop the legal services platform organically and through further acquisition supported by an enlarged £25m financing facility”.
Fairpoint CEO Chris Moat added: “Fairpoint has delivered another strong set of financial results, both in terms of profitability and cash generation, whilst continuing to execute its stated strategy of becoming a broadly based professional services group.
“The addition, post period end, of Colemans in August 2015 now means that on a pro forma basis, legal services is expected to represent almost two-thirds of the group’s revenues. This is expected to provide an important growth stimulus for the remainder of 2015 and beyond and the group is well placed to develop upon the considerable opportunities within the legal services marketplace, both organically and by acquisition.”
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