The listed business behind the Simpson Millar law firm brand has admitted that 2017 will be a ‘year of transition’ as the company seeks to bounce back from nosediving financials.

Fairpoint Group PLC today reported to the London stock exchange that it expects its adjusted profits before tax for calendar 2016 to be £4.9m. In 2015 the company reported profits of £10.5m.

Net debt at the end of last year was almost £20m, compared with £13.6m at the end of 2015. Revenue for the year is likely to fall slightly, from £54.1m to £52.9m. Dividends will be suspended until further notice.

Fairpoint said a restructuring is on track to remove significant costs.

Falling profits are being put down to ‘exceptional costs’ involved in acquiring the Colemans business and closing its debt management arm, but there is a further warning that performance is unlikely to improve this year.

The company said its analysis was that legal services revenues will be 15% lower in 2017 than last year, with performance expected to be ‘well below’ that recorded in 2016.

This reflects a reduction in the number of cases settling in 2017, which the company expects will be reversed in 2018. At that point, the company will have to deal with fallout from personal injury reforms expected to be implemented in October 2018. Fairpoint says it expects the impact to be ‘manageable’.

David Broadbent, newly appointed chief executive of Fairpoint Group, said: 'Significant work has been performed over the last three months to better understand the maturity of the legal case load, improve the visibility of results and to deliver cost savings.

‘We expect 2017 will be a year of transition with significantly lower revenues in legal services coupled with a further contraction in revenues from debt solutions. However, we expect in 2018 to benefit from an improvement in legal services revenues combined with the full realisation of the cost savings currently being made which should deliver a much improved trading performance.’

In January, the group consulted with staff on a restructuring of the business, with some reports saying that 300 jobs were under threat.

A drop in profits was expected following a warning by the company in December. Fairpoint's share price fell 3% after today’s statement.