Final Results

29th Jul 2009 07:00



FOR IMMEDIATE RELEASE

29 July 2009

Accident Exchange Group Plc

RESULTS FOR THE YEAR ENDED 30 APRIL 2009

Accident Exchange Group Plc ("Accident Exchange", the "Group" or the "Company") announces its audited results for the year ended 30 April 2009.

Key points

Financial

* Adjusted revenue, adjusted gross profit, adjusted gross margin, adjusted operating profit and adjusted profit before tax are all stated before amortisation of acquired intangible assets, cost of share based payments, change in fair value of derivative financial liability and exceptional items.

Operational

On outlook, David Galloway, Non-Executive Chairman, stated:

"The difficulties in the domestic and global economy in general and the automotive and banking markets in particular made this a challenging year. Nevertheless, rental day activity to date in the new financial year is holding up well with new account wins compensating so far for the seasonal reduction in volumes normally seen at this time of year.

"After the strenuous efforts to realign the rental fleet to current market conditions, it is encouraging to see that the rental fleet utilisation had improved to 61.8% by the end of the year (58.5% for the year to 30 April 2009) and has improved further to 66.7% today on a revenue basis and 81.5% on a units basis, a level that we have not seen for some years.

"Our primary objective and biggest challenge continues to be the improvement in cash collections and the achievement of cash flow break-even as soon as possible."

CONTACTS:

Accident Exchange Group Plc
Steve Evans, Chief Executive	Today: 020-7367-8888; thereafter 08703-009 781
Martin Andrews, Group Finance Director	Today: 020-7367-8888; thereafter 08703-009 781
Singer Capital Markets Limited	020-3205-7500
Shaun Dobson, Joint Head of Corporate Finance
Bankside
Steve Liebmann or Simon Bloomfield	020-7367-8888

About Accident Exchange

Based in Coleshill, West Midlands, Accident Exchange delivers accident management and other solutions to automotive and insurance related sectors. Fully listed, the stock code is LSE: ACE.

Cautionary Statement

This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Accident Exchange Group Plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Accident Exchange Group Plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein. 

  CHAIRMAN'S STATEMENT

Introduction

The sudden and sharp deterioration in the UK economy is well understood. For the Group, the decline in motor dealership activity levels, the reduction in motoring journeys and associated accident rates, together with the illiquidity issues faced by some UK banks and insurers, combined to make a very difficult and challenging environment for the Group, particularly during the second half of the year. These events have had both operational and financial effects.

Operationally, as the UK economy contracted from last Summer, the number of driven miles decreased, particularly for prestige models, with a consequent reduction in accident volumes. In turn, this resulted in greater available capacity within the UK vehicle repair network which shortened repair times and reduced rental lengths and revenue.

Against this backdrop, and whilst a significant pre tax loss has been reported for the year, full year rental day volumes and revenues* were maintained in line with last year with underlying trading* being conducted profitably* (*stated before exceptional and other items as per note 4 and as narrated below).

Financially, the weakness in the retail automotive market from the autumn onwards adversely affected trade and consumer demand for used vehicles leading to a substantial reduction in used vehicle prices and the £19.6 million exceptional fleet impairment already charged in the results for the first half of the year as narrated below. Furthermore, cash collection from insurers became more difficult in the second half of the year as they suffered from both illiquidity and headcount reductions as a result of the 'credit crunch' and falling investment returns on their cash balances and this has catalysed a £44.2 million exceptional charge in the second half of the year (see narrative below).

Responding to these broader economic issues we acted rapidly in implementing a series of measures to reduce costs and capital investment in order to balance the size of the business with the Group's expected share of a temporarily contracted market. The impact of the recession on insurer behaviour, and on claim settlement activity particularly, has also led us to revise our strategy to improve cash collections.

Fleet, Fleet Impairment and fleet finance facilities

The Group's business model is built on strong relationships with automotive manufacturers and their motor dealers who refer their non fault accident customers to us. In return we pay referral fees, we repatriate the damaged vehicle to them for repair and, in certain instances, we make commitments to purchase certain volumes of new cars, not least so we can replace our existing fleet as it ages to its normal disposal date.

During H1 referral volumes started to fall short of our then continued growth expectations and it became apparent that not all of these fleet commitments would be needed. Consequently we introduced an initiative to motor dealers to swap the purchase of certain new cars for one-off commission payments. This initiative was well received by dealers and the £4.2 million related cash outflow made in H2 facilitated the avoidance of c. £40.0 million in future fleet additions, thus saving interest, depreciation and maintenance costs estimated to be in excess of £10.0 million per annum. As a result of this and other concerted efforts to reduce the fleet, capital spend on new vehicles reduced by 48% to £44.6 million (2008: £85.3 million) and the total fleet has been reduced by 18% to 4,865 vehicles as at 30 April 2009 (30 April 2008: 5,935). Full details of the reduction in fleet size are included below in the Business and Financial Review. Total outstanding fleet purchase commitments as at 30 April 2009 have also fallen by 70% to £30.3 million (2008: £101.4 million) as a result of these initiatives and finance lease debt (note 18) has reduced by 22% to £75.5 million (2008: £97.3 million).

However, we were unable to influence the rapid and considerable reduction in fleet residual values caused by the recession and particularly in the period to December 2008. This was reflected in a £19.6 million exceptional impairment charge ("Fleet Impairment") made against the carrying value of our fleet in the results for the first half of the year (2008: £nil). Whilst the used vehicle market has improved since December 2008, enabling the Group to dispose of vehicles in volumes and at prices slightly ahead of expectations, there still remains considerable uncertainty over the speed with which the UK economy will recover from the current recession and the future direction of the used vehicle market and prices: accordingly none of the Fleet Impairment charged at the half year has been reversed.

Historically, we have used a wide variety of funders to finance the purchase of the Group's vehicle fleet. These facilities have ordinarily been of an uncommitted nature. Over recent months we have seen a number of the Group's funders withdrawing the headroom on their facilities as they themselves have responded to the financial pressures brought on them by the credit crunch and in some instances because they have withdrawn from their own UK lending activities. Over the same period we have successfully obtained new facilities from new lenders and we have also commenced discussions with a number of fleet funding providers including, at their request, several of those funders who have only recently withdrawn their facility headroom, with a view to securing longer term committed facilities on amended terms. We believe that these discussions can be concluded satisfactorily however the availability and terms of these committed facilities is still to be determined and, as set out in note 1, there is no guarantee that they will either be obtained or that they will be obtained on terms acceptable to the Board.

Cash collections and settlement adjustments

Our key priority has been and remains to ensure that the Group improves cash collections to break-even levels as soon as possible. In the Board's view, reduction in back office insurer headcount and illiquidity issues within insurers generally since the beginning of this calendar year has resulted in them preferring short term preservation of their cash resources by slowing payment of their liabilities, leaving them exposed to paying potentially materially higher non-discounted charges and solicitor fees on claims as we litigate them. 

Whilst we increased cash collections in the year by 18% to £157.2 million (2008: £133.0 million), in common with other businesses operating in our sector, we have seen under-recoveries on closed claims ("Settlement Adjustments") rise over recent months and on those claims closed more recently these are now significantly exceeding levels previously anticipated and provided for. As set out in more detail in the Business Review below and in notes 1 and 4 we have made an exceptional settlement adjustment charge in the year of £44.2 million (2008: £nil) (the "Exceptional Settlement Adjustment") to reflect the approach taken towards recovery of amounts claimed.

Valuation of revenue, trade receivables, claims in progress and going concern assumptions

We have produced forecasts which show that the Group will have sufficient funds to meet its liabilities as they fall due and that it can continue to comply with its banking covenants. As such the financial statements have been produced on a going concern basis as narrated in note 1 ('Basis of Preparation').

The audit report on these financial statements is unqualified. Given the extent of the recession and the unprecedented retraction of bank lending globally, auditors generally are increasingly making readers of financial statements aware of those factors that are considered to represent a "material uncertainty" by the inclusion of "emphasis of matter" statements within their audit reports. These emphasis of matter statements do not qualify the audit opinions on the financial statements, they merely highlight certain factors as being of note.

We are not immune from the consequences of recession and the retraction of bank and asset backed lending and, as stated above, we are currently renegotiating future fleet funding facilities, a process that is expected to take several months to conclude and the success of which cannot be guaranteed. The Group has committed working capital facilities in place that do not expire until 30 September 2010, these being available subject, inter alia, to ongoing covenant compliance. We have continued to comply with our banking covenants and to operate within existing facilities. Whilst our financial projections show that our existing facilities are sufficient and that the Group can continue to meet its ongoing covenants, neither of these can be guaranteed. The existence of these material uncertainties may cast significant doubt over the Group's ability to continue as a going concern and this risk is reflected in the basis of preparation (note 1) and the auditors' emphasis of matter paragraph in their audit report.

In addition, we have to make estimates for the valuation of revenue, trade receivable and claims in progress as reflected in these financial statements as they depend, inter alia, on the ultimate Settlement Adjustment expected to arise on claim closure. This is a judgmental process and is one that we have experience of making. The events of this year have made this process more challenging but nevertheless we feel we have a reasonable basis for determining the amounts presented in these financial statements, and the auditors concur with that view and the resultant valuations. However, there exists a material uncertainty that settlement levels may be higher or lower than assumed and, to the extent they are lower, further uncertainty would arise as to the Group's ability to meet the covenants associated with the working capital facilities. This material uncertainty is also reflected in the auditors' emphasis of matter paragraph in their audit report.

We acknowledge these risks and we are focused on addressing them.

Financial results

The results for the year to 30 April 2009 have clearly been materially influenced by the extent of the exceptional items incurred in the year (see note 4).

Adjusted results

The term 'Adjusted' is used to describe the financial results before exceptional items, amortisation of acquired intangible assets, cost of share based payments and change in fair value of derivative financial liability.

Adjusted revenue of £167.0 million was in line with the prior year (£161.9 million). Adjusted gross margin increased to 35.1% (2008: 31.9%), principally as a result of lower depreciation charges consequent from having made the Fleet Impairment, some improvement in CAP Monitor values in 2009 and reduced fleet volumes.

Adjusted profit before tax was £13.3 million (2008: £13.9 million) with the effects of reduced fleet utilisation and rental day mix and increased overheads and interest charges being offset by reduced depreciation charges.

Adjusted basic earnings per share were 13.0 pence (2008: 14.1 pence). 

As stated earlier the Board believes that illiquidity issues amongst insurers adversely impacted upon timely settlement of our claims resulting in debtor days (stated before the offset of the Exceptional Settlement Adjustment provision) rising to 269 days as at 30 April 2009 (2008: 227 days).

Reported results

Total revenue reduced to £132.0 million from £161.9 million in the prior year primarily because the majority of the Exceptional Settlement Adjustment (see note 4) is treated as increased trade discount and is netted off of disclosed revenue. After charging net exceptional and other items (see note 4) of £68.7 million (2008: £4.0 million) the loss before tax was £55.4 million (2008: profit of £9.9 million). Both the loss before tax and adjusted profit before tax were after an increase in net finance costs to £16.8 million (2008: £12.0 million) principally as a result of the finance costs associated with the Convertible Notes which were issued towards the end of the prior period (see note 5). The basic loss per share was 56.6 pence (2008: earnings per share of 9.4 pence).

Cash and borrowings

Cash at bank was £17.2 million at the year end (2008: £27.0 million) with total working capital headroom against bank facilities of £17.2 million (2008: £37.0 million) after a net cash outflow before net proceeds from borrowings of £19.4 million (2008: net cash outflow of £30.3 million, also stated before receipt of £46.6 million net proceeds of the Convertible Notes).

Total net debt as at 30 April 2009 was £149.8 million (2008: £149.0 million) reflecting the reduction in vehicle finance lease obligations to £75.5 million (2008: £97.3 million) referred to earlier, net of reduced cash balances and the draw-down of a £10.0 million revolving credit facility during the year.

Dividends

In light of the current economic environment and until cash collection levels improve and net debt reduces further, the Board does not anticipate recommending the payment of a final dividend (2008: 1.5 pence per share), making the total dividend for the year nil pence (2008: 2.5 pence per share).

People 

The economic and trading issues have presented great challenges to all our people. Dealing with cost reductions is never easy but each and every one have risen to the challenges they faced. There is no better illustration of this than the fact that virtually the entire Group has accepted significant changes to their working patterns and benefits as well as accepting (the Board included) salary and pension contribution reductions.

The commitment shown in these difficult times has been very impressive and I am proud to be associated with such a dedicated workforce. 

Outlook

The difficulties in the domestic and global economy in general and the automotive and banking markets in particular have made this last year a challenging one. Nevertheless, rental day activity to date in the new financial year is holding up well with new account wins compensating so far for the seasonal reduction in volumes normally seen at this time of year.

After the strenuous efforts to realign the rental fleet to current market conditions, it is encouraging to see that the rental fleet utilisation had improved to 61.8% by the end of the year (58.5% for the year to 30 April 2009) and has improved further to 66.7% today on a revenue basis and 81.5% on a units basis, a level that we have not seen for some years.

Our primary objective and biggest challenge continues to be the improvement in cash collections and the achievement of cash flow break-even as soon as possible.

David Galloway

Non-Executive Chairman

29 July 2009

  BUSINESS REVIEW

Introduction

Accident Exchange is one of the UK's leading suppliers of credit hire replacement vehicles to customers referred by the automotive industry. We also deliver accident management and vehicle hire solutions to the contract hire, leasing and insurance related sectors and provide software services and daily rental insurance to motor dealers who themselves provide courtesy cars to their own customers.

Our business is structured to service the market through two principal operating subsidiaries: Accident Exchange Limited and DCML Limited. Accident Exchange operates from our head office in Coleshill, West Midlands, and has regional depots in Belfast, Dartford, Glasgow and Warrington. DCML operates from its offices in Stockport. Our services are provided throughout the UK.

Our mission is to remain number one in our chosen market sector by placing our customers at the centre of everything we do whilst continuing to build and develop an unbeatable team with shared values and with accountability for consistently delivering high levels of personal and operational performance.

Key achievements during the year

Despite the significant challenges of the past year resulting from the combined effects of the economic slowdown on motoring activity and accident rates generally, the collapse of the retail automotive market and unprecedented illiquidity problems within financial institutions which influenced insurer payment profiles, the Group delivered adjusted revenue of £167.0 million, in line with the previous year (2008: £161.9 million).

Initiatives included:

Implemented cost reduction programmes to balance the size of the business with the Group's expected share of the temporarily contracted market;

Reduced our total fleet by 18% to 4,865 vehicles (2008: 5,935 vehicles) and adjusted its composition to match current rental day mix;

Eliminated more than £40.0 million of future fleet purchase commitments;

Implemented 2.75% increase to the ABI GTA tariff with effect from 1 July 2009;

Continued to drive a robust strategy of pursuing existing claims through litigation where insurers fail to settle within the terms of the ABI General Terms of Agreement;

Increased cash collections by 18% to £157.2 million (2008: £133.0 million) in spite of the significant illiquidity issues faced by insurers as a result of the credit crunch;

Supplied rental vehicles to 38,500 customers (2008: 41,000 customers); 

Recorded 1.1 million rental days (2008: 1.1 million);

Contracted with a prestige automotive manufacturer to launch a unique 'non credit hire' insurance based mobility proposition to all of their new car customers from 1 October 2009; and

Effected renewal of top four largest automotive dealer referral contracts in the period.

  Key Performance Indicators

The Board regularly reviews a number of key performance indicators ("KPIs") in order to both manage the business and to ensure that the Group's strategic priorities and objectives are being delivered. These include: 

Key performance indicators	Year ended	Year ended
	30 April 2009	30 April 2008
		Restated (note 2)
Operational KPIs
Rental fleet (no. of vehicles)	4,300	4,850
Customers supplied with rental vehicle (no.)	38,500	41,000
Vehicle rental days
Prestige vehicles (no. millions)	0.5	0.6
Mainstream vehicles (no. millions)	0.6	0.5
Total (no. millions)	1.1	1.1
Rental fleet utilisation*
First half of the financial year	59.8%	60.8%
Second half of the financial year	56.9%	60.2%
Financial KPIs
Adjusted revenue (£'m)	167.0	161.9
Adjusted profit before tax (£'m)	13.3	13.9
Adjusted basic earnings per share (pence)	13.0	14.1
Adjusted cash outflow from operations - after fleet related cash flows (£'m)	(13.7)	(20.1)
Exceptional Settlement Adjustment (£'m)	44.2	-
Days sales in debtors (before Exceptional Settlement Adjustment)	269	227
Cash collections (£'m)	157.2	133.0
Trade receivables by status
- In house (£'m)	64.3	66.4
- At solicitors, pre-issue (£'m)	26.7	18.2
- At solicitors, proceedings issued (£'m)	33.6	26.3
Exceptional fleet impairment (£'m)	19.6	-
Fleet costs (depreciation, contract hire charges and finance lease interest)	29.9	40.9

* Rental fleet utilisation is determined as the percentage of actual revenue earned as compared to the potential total revenue earnable by the Group's fleet of revenue generating vehicles. 

An explanation of the changes in these KPIs during 2009 compared to the prior year is set out in the remainder of this Business Review.

Operations

Overview

Our core market place remains automotive manufacturers and motor dealers, in which we believe we have a leading position. Whilst commercial morale amongst this automotive referral base has been low as a result of the economic downturn, our core relationships remain strong. Contract renewals were agreed with a number of major referrers during the year and there were no material account losses. The accounts renewed included our four largest automotive channel referrers.  We continue to work with our referral partners to identify and then exploit those opportunities which help them generate after-sales revenue.

  Hire starts in the year were 38,500 (2008: 41,000), though rental days were maintained at 1.1 million, in line with the prior year with the reduction in hire starts being compensated by higher average rental length in H1 compared to the prior year. However, this trend reversed materially during H2 due to the speedier repair times facilitated by the spare capacity within the UK vehicle repair network as noted in the Chairman's Statement.

Headcount rose during the first half of the year in anticipation of continuing growth, peaking at 810. Swift action was taken as soon as there were indications that the UK economy was heading into recession and referral volumes fell below our previous growth expectations last Autumn with headcount ending the year at 775 (2008: 715) and with the per capita cost reducing with the co-operation of our workforce.

A number of material cost reduction measures were implemented during the year, predominantly in non-customer facing activities. These measures included reductions in fleet additions, directors' and employees' salary and benefits, changes to working practices and tightening of control over discretionary expenditure, all of which were designed to better balance the cost base of the business with levels of activity lower than originally forecast.

We recently won a new referring account from a competitor and volumes from this referrer are now compensating for the normal seasonal reduction in volumes. This account generates predominately mainstream vehicle referrals, leading to some further realignment of the fleet to match the anticipated mix of referral volumes. We also contracted with a prestige automotive manufacturer to launch a unique 'non credit hire' insurance based mobility proposition to all of their new car customers from 1 October 2009.

We are also pleased to note the recent 2.75% increase in car hire rates agreed with insurers under the ABI General Terms of Agreement (2008: 3.50% increase) which was implemented on 1 July 2009.

Cash collections and litigation

Whilst cash collections rose by 18% to £157.2 million (2008: £133.0 million), collecting our claims from insurers became increasingly more difficult as the year progressed and noticeably more so since 1 January 2009. The Board believes that from around this time insurers took actions to preserve their cash resources in response to their own illiquidity problems rather than taking advantage of the significant discounts available for prompt payment under the ABI GTA. Whilst settling claims in a timely manner would have reduced the overall claim costs (these costs rise not only if they fail to pay within 90 days under the GTA but also because of the litigation defence costs that fall for payment by them after we litigate) it is clear from the extent of "government bailout money" that was injected into financial institutions that their liquidity problems were verging on critical.

In addition, insurers have cut their own back office functions to save costs, reducing the effectiveness with which they can deal with claims and respond to our attempts to settle claims within the ABI GTA timeframes.

In this materially changed financial environment, since January 2009 the task of driving cash collections towards our targeted levels became increasingly difficult and resulted in us having to both concede Settlement Adjustments at levels materially higher than previously anticipated and provided for in previous financial statements and increase both the speed and volume of claims sent to our solicitor panel for litigation. We made reference to the increased settlement adjustments in the Interim Management Statement released on 16 March 2009. Because of all of the issues narrated above, which meant that we were trading through an unprecedented and changed external financial environment which increased our cash flow pressures, we are treating the increased level of Settlement Adjustment actually experienced in the period since 1 January of £16.3 million as an exceptional item.

We then have also had to estimate the potential ongoing effect of these recent settlement adjustment levels on the expected settlement adjustments that may be experienced when closing trade receivables and claims in progress outstanding at 30 April 2009. We expect our litigation strategy, and the increased costs that insurers will have to bear as a result of it, to eventually result in insurers improving their appetite to save money by prompt payment and that in due course this will outweigh their illiquidity issues. However, we cannot assume that this will be seen in the immediate future and therefore we have also increased the Settlement Adjustment that we apply to claims outstanding at the year end. This increased Settlement Adjustment, which has also been treated as an exceptional item given its size and origin, amounts to £27.9 million (making the "Exceptional Settlement Adjustment" recognised in the results for the year £44.2 million in aggregate (2008: £nil)).

We have made a number of improvements to our own in house collection processes in the past few months in order to react to the back office issues being faced by insurers. The aim of those changes has been to focus on improving the volume of new claims settling before the expiry of 90 days within the range of normal settlement discounts. We are encouraged by the early results of these operational process changes.

We will, however, robustly litigate claims to maximise collection levels and in recent months we have introduced litigation process improvements to deal with the increased number of claims requiring litigation and so that we can better counter and neutralise the tactics being adopted by some insurers. We expect these process improvements to materially benefit both the speed and magnitude of collections and to the extent they are successful, the £27.9 million Exceptional Settlement Adjustment may or may not be crystallised in full. Our primary objective continues to be the improvement in cash collections to a minimum of cash flow break-even and beyond as soon as possible.

Litigation continues to be used when all reasonable avenues of compromise and negotiation have failed to close the claim. The Group now has a panel of 18 specialist firms of solicitors who act in respect of those claims where the debt remains outstanding after the 90 days provided by the ABI GTA. Cash collections from the litigation process continued to improve, more than doubling to £31.8 million (2008: £14.1 million) as the Group expanded its appetite and capacity to litigate during the year.

Fleet

We provide our services throughout the UK and during the first quarter of the past year our existing depots in Coleshill, Glasgow and Warrington were supplemented by depots in Belfast and Dartford. These additional depots have enabled faster delivery times as well as reduced costs of delivery. We continually strive for a balance between fleet size and mix across our depot network with the profile and geographic spread of referrals so that we can maintain like-for-like vehicle replacement on a brand and model basis, thereby optimising utilisation and reinforcing brand loyalty with our referral partners' customers.

The Board became concerned during Summer 2008 about the potential effects of a recession on forecast referral volumes and the effect this would have on the required size, profile and residual value of the Group's existing fleet. Corrective action was taken quickly to reduce the level of exposure to adverse changes in residual values and the level of risk associated with the fleet. By renegotiating commercial terms with a number of our referral partners, the Group has reduced future fleet purchases of over £40.0 million in return for one-off commission payments of an aggregate £4.2 million (2008: £nil). This one-off commission cost has been disclosed as an exceptional cost (note 4) in the year.

As a result of the actions taken, the rental fleet totalled 4,300 units at 30 April 2009 being 550 units (11%) fewer than a year previously and 1,070 units (17%) fewer than at 31 October 2008. Future fleet purchase commitments have been reduced materially to £30.3 million (2008: £101.4 million). We also reduced our non-rental fleet from 1,085 vehicles to 565 vehicles, mainly by changing the basis of vehicle provision within our Accident Management Solution away from owned cars to cars brought in on short term flexible rental arrangements from third party rental operators. As a result, the total fleet volume fell to 4,865 vehicles as at 30 April 2009 compared to 6,000 vehicles as at 31 October 2008 (30 April 2008: 5,935 vehicles).

The Group launched its AE Car Auction website (www.aecarauction.com) in January 2008 and during the current financial year has sold over 1,400 vehicles to trade buyers for total consideration of £20.8 million (2008: 360 vehicles; £6.8 million). This has helped the Group counter some of the reduction in used vehicle demand. AE Car Auction has improved flexibility around the disposal of the rental fleet, reducing the cost associated with vehicle disposals and maximising the proceeds from those disposals. In addition, the Group continues to use conventional auction houses and a direct-to-trade route giving it the opportunity to dispose of vehicles on the best available terms available.

Nevertheless, rapidly declining consumer confidence, particularly during the Autumn period, sharply reduced demand for used vehicles. These exceptional factors materially depressed forecast residual fleet values and were reflected in the £19.6 million exceptional impairment charge made against the carrying value of our fleet as at 31 October 2008 (2008: £nil).

Whilst CAP Motor Research ("CAP") valuations (from which we determined the Fleet Impairment and which we use to determine subsequent and ongoing depreciation charges - see notes 2 and 4) have improved recently, the Board has not reversed any of the Fleet Impairment charge as these recent improvements are considered to be short term in nature and to have arisen due to motor dealerships (the probable buyer of our vehicles) currently suffering a shortage in supply of quality second hand vehicles. Dealerships have not been selling their normal volumes of new cars, thus reducing their normal intake of part-exchanged second hand vehicles. Accordingly, they have had to buy in vehicles from external sources and our sale prices have benefitted from this increased demand. The economic outlook, and the uncertainty that still exists over likely fleet values over the remaining period of ownership of the impaired fleet (up to 18 months), is still extremely depressed and the Board believes that the prudent basis on which it determined the requirement for a Fleet Impairment at 31 October 2008 still stands. Consequently we have not reversed any of the Fleet Impairment in response to what has so far been a short term and small improvement in CAP values.

If CAP values remain at current levels, the ongoing trading results of the business will benefit from lower monthly depreciation charges. We estimate that the trading results for the current year benefited by £5.8 million as a result of these factors. It can also be seen from the financial statements that we reported a profit on disposal for the year of £1.1 million arising on the sale of 2,863 vehicles, an average of only £380 per car. Since 1 November 2008, the basis of accounting for fleet depreciation is done on a monthly basis whereby we predict the intended disposal date by vehicle and depreciate its previous month end net book value down to its expected residual value (as forecast monthly by CAP Monitor) over its expected remaining period of ownership. This process should match the expected sale proceeds to CAP values on the presumed date of disposal, resulting in zero profit or loss in the month of disposal. However, within any one month we may defer or bring forward the disposal date of specific vehicles and to the extent that sale proceeds also vary from CAP values depending on local demand for specific models at auction, actual sale proceeds can be higher or lower than the previous months' forecast CAP value for the vehicles actually sold. These factors, together with the fantastic efforts of the fleet team internally, have resulted in sale proceeds for certain models exceeding the previous months' CAP expectation. In the month of disposal the "depreciation adjustment" required to bring the previous months' net book value to match the actual sale proceeds amount is treated as a profit or loss on disposal in the month of sale rather than an adjustment to depreciation.

Financial results

Your attention is drawn to note 1: "Basis of preparation" and note 2: "Change in accounting policy, restatement of prior year comparatives and change in accounting estimate", all of which have resulted in changes to the magnitude and disclosure of certain Income Statement items as compared to how we have reported in previous years.

In particular we have changed our accounting estimates consequent from IAS 39 and IAS 18 resulting in the restatement of comparatives and the deferment of £5.6 million of other operating income (see below) to future years. The profit effect of this is to reduce current year loss before tax (after the effects of prior year restatements) by £0.6 million compared to what would otherwise be reported.

Revenue

Adjusted revenue was in line with the prior year at £167.0 million (2008: £161.9 million). Accident management and related services (primarily credit hire) revenue ("Accident Management Revenue") totalled £122.7 million (2008: £121.6 million). Lower margin Credit Repair Revenue, which has been curtailed since the year end, was £44.3 million (2008: £40.3 million) and generated a gross margin of 4% (2008: 5%).

Accident Management Revenue reflects 1.1 million rental days (2008: 1.1 million), within which prestige rental activity decreased to 0.5 million days (2008: 0.6 million days) and mainstream vehicle rental activity increased to 0.6 million days (2008: 0.5 million days). Accordingly, 52% of rental days were generated by mainstream vehicles in the year compared to 47% in the prior year.

The growth in lower margin mainstream rental days reflects the full year effect of certain large dealer and contract hire and leasing company account wins in the prior year. The reduction in prestige rental days reflects the difficult economic conditions in the prestige dealership market, reductions in the use of prestige vehicles (possibly linked for part of the year to higher fuel costs) and overall reductions in rental lengths. Mainstream referral volumes from a significant new account win in March 2009 have countered the seasonal reduction in volumes that ordinarily arise at the end of winter. This account win further increases the proportion of mainstream rental days expected in the new financial year.

Other operating income

As narrated in note 2 we have amended our adoption of IAS 39 and IAS 18 such that the effective interest residing within the initial recognition of revenue is deferred and released to the Income Statement as other operating income over the expected credit period to claim closure.

Gross profit and margins

Adjusted gross profit was £58.6 million (2008: £51.7 million) and adjusted gross margin increased to 35.1% (2008: 31.9%) principally as a result of lower depreciation charges consequent from having reduced fleet costs with the Fleet Impairment and subsequent improvement in CAP Monitor forecast fleet residual values. After the exceptional charges set out in note 4 (primarily the Fleet Impairment of £19.6 million (2008: £nil) and £43.6 million of Exceptional Settlement Adjustment (2008: £nil)) the Group recorded a gross loss of £8.8 million (2008: gross profit of £51.7 million).

Rental fleet utilisation for the year of 58.5% (2008: 60.5%) was lower than originally expected due to growth being curtailed by deterioration in the UK economy and its impact on referral volumes. However, following realignment of the rental fleet in light of reduced levels of business, utilisation improved to 61.8% by the end of the year and has further improved to 66.7% today on a revenue basis and 81.5% on a units basis, a level that we have not seen for some years.

Administrative expenses

Administrative expenses before exceptional and other items rose to £34.1 million (2008: £29.0 million), of which £24.8 million or 73% (2008: £21.1 million or 73%) related to headcount, premises and IT communications related costs. Total administrative expenses increased to £36.3 million from £32.0 million in the prior year, primarily as a result of the above factors.

Settlement estimation and impairment of receivables

The Group recognises revenue, claims in progress and trade receivables at amortised cost using the effective interest rate method after an allowance for any discounts that are expected to arise under the terms of the ABI General Terms of Agreement and net of any other settlement adjustments expected to arise on the settlement of claims. This judgment is made on the basis of historical and expected net recovery from the settlement of claims and is influenced by the approach taken towards recovery of amounts claimed.

As set out in the Chairman's Statement, our key priority remains to ensure that the Group improves cash flow. Whilst we have increased cash collections in the year to £157.2 million (2008: £133.0 million) we have, we believe in common with other businesses operating in our sector, seen settlement adjustment levels rise since 1 January 2009 and settlement adjustment levels on claims closed more recently have exceeded previously anticipated and provided levels. The Group has considered the impact of this on the carrying value of trade receivables and claims in progress as at 30 April 2009 and has made an Exceptional Settlement Adjustment provision of £27.9 million (2008: £nil), which together with the Exceptional Settlement Adjustment of £16.3 million (2008: £nil) actually experienced in the last four months of the year, has resulted in an aggregate Exceptional Settlement Adjustment (see note 4) charge in the year of £44.2 million (2008: £nil).

We will seek to minimise the crystallisation of the £27.9 million provision and will continue to negotiate with insurers promptly, allowing them to take advantage of the discounts available to them under the ABI GTA. Failure by them to pay within 90 days will still mean that we will litigate on the claim and our appetite is undiminshed to see the claim heard in court if required. Litigation leads to a longer time frame to receipt but would also see an increase in the level of cash expected to be received on claim closure. Our task is to balance the flow of cash receipts from claims with the potential longer term value of a claim, bearing in mind insurers' willingness and ability to pay, combined with our own objectives of attaining and maintaining break-even collection levels. 

Fleet, residual values and Fleet Impairment 

As we set out in our Interim Report, from last Autumn there was a marked deterioration in the outlook for the UK economy and, with it, a fall in consumer confidence. As a result there was a significant reduction in demand for new and used vehicles that materially depressed forecast fleet values. In light of those events the Group reviewed the carrying value of every vehicle in its fleet and determined the requirement for a consequent £19.6 million exceptional impairment charge.

The Group uses data provided by CAP Motor Research ("CAP") to help predict the future residual values of its vehicle fleet on a vehicle-by-vehicle basis depending on its age, original purchase price and current and expected mileage. It uses empirical data gathered from manufacturers, dealers and auction houses which are assessed in a forward-looking model to drive forecast residual values on a model-by-model basis.

Further details as to the determination of the £19.6 million Fleet Impairment charge are given in note 4.

The Board reviewed the Group's depreciation policy at the half year in light of the issues set out above. As a result, the basis of determining the ongoing monthly depreciation charge on vehicles was amended, effective from October 2008 so that for each vehicle, on a monthly basis, its residual value at its intended disposal date is predicted based on the Board's view of data provided by CAP, with the difference between its net book value and its CAP value being depreciated over its remaining expected period of ownership. Vehicle depreciation is therefore now more volatile than under the previous straight line basis, but will carry the advantage of immediately reflecting any further positive or negative variances in expected CAP values.

Further exceptional and other items

As set out in note 4 below, further exceptional costs of £5.0 million (2008: £nil) have been incurred as a result of implementing various cost reduction measures.

The prior period contained exceptional items of (i) £0.9 million which was incurred in respect of professional advisor fees and termination costs associated with the early redemption of the Group's working capital facilities that were replaced by the senior secured credit agreement with Morgan Stanley Bank International Limited ("Morgan Stanley") entered into in July 2008; and (ii) costs of £1.1 million in launching Accident Management Schemes for newly acquired referral partners. There were no such costs for either of these in the year ended 30 April 2009.

In order to present the Board's view of underlying trading performance and thereby aid and improve an understanding of the Group's financial performance, we have consistently presented certain items as either non-trading or exceptional.

Amortisation of acquired intangible assets and costs of share based payments are non-trading and non-cash charges and, in line with prior periods, have therefore been excluded in determining adjusted profit.

The change in fair value of the derivative financial liability, being the equity conversion option attaching to the Convertible Notes, is also non-cash and is driven by market factors largely beyond the Group's control and has therefore also been excluded in determining adjusted profit.

Further details of non-trading and exceptional items are set out in note 4.

  Net finance costs

Total net finance costs were £15.3 million (2008: £13.0 million). Interest payable on bank loans, principally the Morgan Stanley Facility, net of interest receivable on cash deposits was £3.2 million (2008: £3.3 million). Vehicle finance lease interest rose to £8.0 million (2008: £7.1 million) reflecting an increase in fleet acquired through finance leases rather than on contract hire terms.

Net finance costs also include the full year cost of the Convertible Notes of £5.6 million (2008: four month cost of £1.7 million) comprising a 5.5% cash coupon component payable twice yearly of £2.8 million in aggregate (2008: £0.9 million) and £2.8 million (2008: £0.8 million) in aggregate in respect of accreted interest (payable in 2013 only if the Convertible Notes are not converted to equity by January 2013), amortisation of issue costs and amortisation of the value attributed to the equity conversion component at inception, which was separately recognised as a derivative financial liability.

The change in the fair value of the Convertible Notes of £1.5 million is a non-cash credit for the year (2008: charge of £0.9 million) and has been disclosed as an exceptional item as narrated above.

Loss before tax

The Group recorded a loss before tax of £55.4 million (2008: profit of £9.9 million) primarily as a result of the exceptional items detailed above.

Taxation

The effective tax rate for the year was 27.4% (2008: 32.3%) including the effect of the disallowable nature of the £1.5 million credit (2008: charge of £0.9 million) in respect of the change in fair value of the derivative financial liability associated with the equity conversion option of the Convertible Notes. The effective rate of tax on adjusted profit before tax was 30.8% (2008: 28.1%).

The reduction in capital allowances from 25% to 20% has materially reduced the annual level of tax relief that will arise from our investment in our fleet and other capital assets. The increased level of related timing differences has consequently led to the recognition of an associated deferred tax asset of £2.2 million (2008: deferred tax liability of £3.9 million).

As at 30 April 2009 deferred tax assets totalled £8.2 million (2008: deferred tax liability of £3.3 million), the movement of £11.5 million reflecting primarily the above change in capital allowances (£6.1 million) and an asset of £6.7 million in respect of current year tax losses (2008: £nil). These tax losses are available for offset against future tax charges.

Earnings / (loss) per share

The basic loss per share (note 7) was a loss of 56.6 pence per share (2008: earnings per share of 9.4 pence) and adjusted earnings per share was 13.0 pence per share (2008: 14.1 pence per share).

As the current year's statutory result before taxation was a loss, fully diluted loss per share is equal to the basic loss per share of 56.6 pence (2008: diluted earnings per share of 9.5 pence). Adjusted diluted earnings per share (note 8) was 9.6 pence per share (2008: 12.0 pence per share), the dilution primarily reflecting the maximum potential dilutive effect of the Convertible Notes. 

  Cash Flows

Cash flows from operating activities

Cash generated from operations for the year improved to £34.2 million (2008: £24.9 million). The Board measures internally an adjusted operating cash flow as it considers that all fleet related cash flows are operating in nature. The Group's adjusted operating cash flows were as follows:

Adjusted cash flows from operations	Year ended		Year ended
	30 April 2009		30 April 2008
	£'m		£'m
Operating (loss) / profit	(40.1)		22.9
Depreciation, fleet impairment and amortisation of intangible assets	41.3		24.0
(Profit) / loss on disposal of vehicles, plant and equipment	(1.1)		1.3
Cost of share based payments	0.9		0.6
EBITDA	1.0		48.8
Changes in working capital:
Decrease / (increase) in trade and other receivables and claims in progress due to:
Movement before exceptional charges	(24.7)	}	(44.3)
Realised exceptional settlement adjustments	16.3
	(8.4)		(44.3)
Exceptional charge for potential increased settlement adjustment	27.9		-
Decrease / (increase) in trade and other receivables and claims in progress	19.5		(44.3)
Increase in payables	5.5		4.5
Adjusted cash inflow from operations	26.0		9.0
Proceeds of vehicle disposals	35.2		43.9
VAT recovered on fleet acquisition	8.2		15.9
Capital element of finance lease payments:
Deposits	(5.3)		(10.2)
Monthly repayments	(31.0)		(25.2)
Balloon repayment at disposal	(38.8)		(46.4)
Finance cost element of finance lease payments	(8.0)		(7.1)
Fleet related cash flows	(39.7)		(29.1)
Adjusted cash outflow from operations - after fleet related cash flows	(13.7)		(20.1)

This shows a reduction in adjusted cash outflow from operations after fleet related cash flows from £20.1 million in 2008 to £13.7 million in 2009, reflecting improvement in adjusted cash inflow from operations to £26.0 million (2008: £9.0 million) net of cash outflows arising from ownership of the fleet rising from £29.1 million to £39.7 million.

The improvement in adjusted cash inflow from operations to £26.0 million was lower than our expectations caused, in the Board's view, by the impact of the deterioration in the economic environment and its impact on insurers' own illiquidity and consequent inability to settle our claims in a timely manner. This has driven a consequent increase in debtor days (before the Exceptional Settlement Adjustment provision of £27.9 million) to 269 days (2008: 227 days). The increase in trade receivables during the prior year reflected growth in the business and the adverse impact of a subsequently defeated legal challenge as to the enforceability of certain of the Group's historical hire agreements.

Of the total fleet, 4,483 vehicles (92%) were owned (as opposed to contract hire rented - where cash flows are deducted from cash outflow from operations) as at 30 April 2009 as compared to 4,858 (82% of total fleet) at 30 April 2008. Cash flows associated with finance leased vehicles depend on the rate of cycling the fleet during the year.

During the year 2,487 finance leased vehicles were acquired (2008: 3,924) at a VAT inclusive cost of £53.3 million (2008: £101.9 million). As such, VAT recovered on fleet additions reduced to £8.2 million from £15.9 million in 2008 and the deposit paid on acquisition reduced to £5.3 million from £10.2 million.

A total of 2,863 finance leased vehicles were disposed during the year (2008: 2,830 vehicles) generating proceeds of £36.6 million of which £1.4 million was received shortly after the year end (2008: £43.9 million all of which was received before the year end) which funded the repayment of finance lease debt outstanding at disposal of £38.8 million and £46.4 million respectively. The gap per vehicle inherent in the closing fleet has narrowed as a result of recent CAP valuation improvements and because we are able to keep the vehicles to nearer the end of their anticipated two year life now that utilisation rates have improved to more acceptable levels.

Net cash flow from operating activities

Net interest paid rose to £13.2 million (2008: £9.8 million) reflecting the full year payment of the 5.50% cash coupon on the Convertible Notes of £2.8 million (2008: £nil) and increased finance lease interest resulting from financing the majority of fleet acquisitions through finance lease arrangements whereas a higher proportion were acquired on contract hire terms in the previous year.

After corporation tax receipts of £1.5 million generated through the carry back of current year tax losses against prior year taxable profits which was already attained by the end of the year (2008: tax payments of £3.5 million) net cash inflow from operating activities was £22.5 million (2008: £11.6 million).

Investing activities

In addition to the cash flows associated with finance leased fleet, other net capital expenditure reduced to £0.8 million (2008: £2.0 million), the prior year spend included completion of infrastructure improvements at the Group's head office.

Financing and net debt

Working capital facilities

As at 30 April 2009, the £40.0 million Morgan Stanley Facility (repayable in September 2010) was fully drawn (2008: £30.0 million of £40.0 million) and cash at bank was £17.2 million (2008: £27.0 million). The Group's total headroom against working capital facilities as at 30 April 2009 was therefore also £17.2 million (2008: £37.0 million).

The Group has reported compliance with its banking covenants throughout the year and, based on its most recent trading and financial projections, the Board believes that the Group will continue to comply with its covenants. The covenants include net debt to profitability covenants, an interest cover covenant and a debtor leverage covenant, all of which are tested quarterly in line with the Group's reporting periods, and are as detailed in the Interim Report released in December 2008 and available from the Group's website at www.accidentexchange.com.

  Net debt

Net debt of £149.8 million has reduced materially from the £174.0 million reported as at 31 October 2008, primarily through the reduction in finance lease debt from £106.5 million at that date to £75.5 million as at 30 April 2009. Net debt is analysed as follows:

Analysis of net debt	30 April	30 April
	2009	2008
	£'m	£'m
Working capital facilities drawn down	40.0	30.0
Other bank loans	1.8	2.2
Finance lease obligations	75.5	97.3
Convertible Notes	50.0	50.0
Cash at bank	(17.2)	(27.0)
	150.1	152.5
Derivative financial liability recognised at inception of Convertible Notes excluded from net debt	(0.6)	(0.6)
Convertible Notes finance charges accrued	3.6	1.5
Unamortised debt issue costs	(3.3)	(4.4)
Net debt	149.8	149.0

Net bank debt

Net bank debt (excluding finance lease obligations and the Convertible Notes, and after offset of related debt issue costs of £0.8 million (2008: £1.2 million)) was £23.8 million (2008: £4.0 million), which includes a bank loan of £1.8 million (2008: £2.2 million) in connection with infrastructure improvements at the Group's administration centre and main fleet facility.

Finance lease obligations

Finance lease obligations reduced from £97.3 million as at 30 April 2008 to £75.5 million as at 30 April 2009, reflecting a substantial reduction in new debt for fleet replacement and expansion to £53.3 million (2008: £101.9 million) resulting from fleet reduction measures taken during the year, net of capital repayments of £75.1 million (2008: £81.8 million).

Dividends

Dividends of £1.1 million (2008: £1.8 million) were paid during the year, consisting of the final dividend for 2008 of 1.5 pence per share declared on 30 June 2008 and paid on 9 September 2008. No interim dividend for 2009 was paid (2008: 1.0 pence per share) and no further dividends will be declared until cash collections improve and net debt reduces.

Other balance sheet items

Capital expenditure of £45.6 million (2008: £86.9 million) related principally to cycling of the vehicle fleet with 2,487 vehicles acquired under VAT inclusive finance lease arrangements at a capital (VAT exclusive) cost of £44.6 million (2008: 3,924 vehicles at a VAT exclusive cost of £85.3 million). 

Claims in progress reduced to £10.6 million (2008: £15.7 million) reflecting lower levels of credit hire revenue in Q4 FY2009 compared to the prior period and a slight shortening of the time taken to invoice closed claims.

  Principal risks and uncertainties

A number of principal operational and financial risks are faced by the Group that could affect its performance, including:

The principal financial risks and uncertainties comprise:

Our people

In addition to the Chairman's comments, our thanks go to each and every employee of Accident Exchange and DCML for their exceptional commitment over the past year in difficult times.

Looking ahead

The Board retains a strong focus on the tasks of driving cash flows to at least break-even through close control over costs and most importantly improvements in cash collection levels.

Steve Evans  Martin Andrews

Chief Executive Group Finance Director

29 July 2009 29 July 2009 

  Consolidated Income Statement

For the year ended 30 April 2009

		Year ended	Year ended	Year ended	Year ended	Year ended	Year ended
		30 April	30 April	30 April	30 April	30 April	30 April
		2009	2009	2009	2008	2008	2008
		Before excep -tional and other items*	Excep -tional and other items*	Total	Before excep -tional and other items*	Excep -tional and other items*	Total
					Restated (note 2)		Restated (note 2)
	Note	£'m	£'m	£'m	£'m	£'m	£'m
Revenue	3	167.0	(35.0)	132.0	161.9	-	161.9
Cost of sales		(108.4)	(32.4)	(140.8)	(110.2)	-	(110.2)
Gross profit / (loss)		58.6	(67.4)	(8.8)	51.7	-	51.7
Administrative expenses
Amortisation of acquired intangible assets		-	(0.5)	(0.5)	-	(0.5)	(0.5)
Share based payments		-	(0.9)	(0.9)	-	(0.6)	(0.6)
Exceptional costs		-	(0.8)	(0.8)	-	(1.9)	(1.9)
Other administrative expenses		(34.1)	-	(34.1)	(29.0)	-	(29.0)
		(34.1)	(2.2)	(36.3)	(29.0)	(3.0)	(32.0)
Other operating income	3	5.6	(0.6)	5.0	3.2	-	3.2
Operating profit / (loss)		30.1	(70.2)	(40.1)	25.9	(3.0)	22.9
Finance income	5	0.5	-	0.5	0.8	-	0.8
Finance costs	5	(17.3)	-	(17.3)	(12.8)	(0.1)	(12.9)
Change in fair value of derivative financial liability	5	-	1.5	1.5	-	(0.9)	(0.9)
Profit / (loss) before tax		13.3	(68.7)	(55.4)	13.9	(4.0)	9.9
Taxation	6	(4.1)	19.3	15.2	(3.9)	0.7	(3.2)
Profit / (loss) for the year		9.2	(49.4)	(40.2)	10.0	(3.3)	6.7
Earnings / (loss) per share
Basic	7	13.0p		(56.6)p	14.1p		9.4p
Diluted	8	9.6p		(56.6)p	12.0p		9.5p

* Other items consist of amortisation of acquired intangible assets, cost of share based payments and change in fair value of derivative financial liability. Exceptional and other items are set out in note 4.

All results are attributable to continuing operations.

The Directors do not recommend payment of a final dividend for the year ended 30 April 2009 (2008: 1.5 pence per share). No interim dividend was paid (2008: 1.0 pence per share) resulting in a total dividend of £nil for the year ended 30 April 2009 (2008: 2.5 pence per share).

  Consolidated Balance Sheet

At 30 April 2009

		30 April	30 April
		2009	2008
			Restated (note 2)
	Note	£'m	£'m
Assets
Non-current assets
Property, plant and equipment	10	62.2	93.7
Goodwill		21.5	21.5
Other intangible assets		2.6	3.2
Deferred tax asset	14	8.2	-
		94.5	118.4
Current assets
Claims in progress		10.6	15.7
Trade and other receivables	11	97.0	109.9
Cash and cash equivalents		17.2	27.0
		124.8	152.6
Non-current assets held for sale	12	1.0	0.3
		125.8	152.9
Total assets		220.3	271.3
Liabilities
Current liabilities
Financial liabilities - borrowings	13	(46.3)	(39.0)
Trade and other payables		(24.7)	(19.2)
Current tax liabilities		(0.4)	(2.6)
		(71.4)	(60.8)
Net current assets		54.4	92.1
Non-current liabilities
Financial liabilities - borrowings	13	(120.7)	(137.0)
Derivative financial liabilities	13	-	(1.5)
Deferred tax liabilities	14	-	(3.3)
		(120.7)	(141.8)
Total liabilities		(192.1)	(202.6)
Net assets		28.2	68.7
Shareholders' equity
Share capital	15	3.6	3.6
Share premium		26.2	26.2
Other reserves		11.5	11.5
Retained earnings		(13.1)	27.4
Total shareholders' equity		28.2	68.7

  Consolidated Cash Flow Statement

For the year ended 30 April 2009

		Year ended	Year ended
		30 April	30 April
		2009	2008
	Note	£'m	£'m
Cash flows from operating activities
Cash generated from operations	16	34.2	24.9
Finance income received		0.7	0.6
Finance costs on bank loans		(3.1)	(3.3)
Finance costs on Convertible Notes		(2.8)	-
Finance cost element of finance lease payments		(8.0)	(7.1)
Taxation recovered / (paid)		1.5	(3.5)
Net cash inflow from operating activities		22.5	11.6
Cash flows from investing activities
Purchase of property, plant and equipment		(1.0)	(1.9)
Purchase of intangible assets		-	(0.1)
Proceeds from sale of property		0.2	-
Proceeds from sale of vehicles, plant and equipment		35.2	43.9
Acquisition of subsidiary, net of cash acquired		-	(0.2)
Net cash inflow from investing activities		34.4	41.7
Cash flows from financing activities
Proceeds from issue of Convertible Notes	13	-	50.0
Convertible Notes issue costs	13	-	(3.4)
Proceeds from borrowings	17	10.0	33.9
Repayment of borrowings	17	(0.4)	(30.1)
Capital element of finance lease payments	17	(75.1)	(81.8)
Purchase of own shares		(0.1)	-
Dividends paid	9	(1.1)	(1.8)
Net cash used in financing activities		(66.7)	(33.2)
Net (decrease) / increase in cash and cash equivalents		(9.8)	20.1
Cash and cash equivalents at beginning of the year		27.0	6.9
Cash and cash equivalents at end of the year		17.2	27.0

  Consolidated Statement of Changes in Equity

For the year ended 30 April 2009

	Share capital	Share premium	Other reserves	Retained earnings	Total
				Restated (note 2)
	£'m	£'m	£'m	£'m	£'m
At 1 May 2007 - as previously reported	3.6	26.2	11.5	23.4	64.7
Prior year adjustment (note 2)	-	-	-	(1.5)	(1.5)
At 1 May 2007 - restated	3.6	26.2	11.5	21.9	63.2
Total recognised income and expense	-	-	-	6.7	6.7
Equity settled share based payments	-	-	-	0.6	0.6
Dividends paid (note 9)	-	-	-	(1.8)	(1.8)
At 30 April 2008	3.6	26.2	11.5	27.4	68.7
Total recognised income and expense	-	-	-	(40.2)	(40.2)
Equity settled share based payments	-	-	-	0.9	0.9
Purchase of shares for Employee Trust	-	-	-	(0.1)	(0.1)
Dividends paid (note 9)	-	-	-	(1.1)	(1.1)
At 30 April 2009	3.6	26.2	11.5	(13.1)	28.2

  Notes to the Final Results Announcement

For the year ended 30 April 2009

1. Basis of preparation

The Group's consolidated financial statements have been prepared by the Directors in accordance with IFRS and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that have been adopted by the European Union, and with those parts of the Companies Act 2006 applicable to those companies reporting under IFRS.

The financial statements have been prepared under the historical cost convention, except for the costs of share based payments and derivative financial liabilities; these are stated at fair value. The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest £0.1 million unless otherwise indicated.

The principal accounting policies of the Group are set out in the Group's Annual Report and Accounts 2009 which will be sent to shareholders in due course and which will be available from the investor relations section of the Group's website www.accidentexchange.com.

Settlement estimation and going concern

Background

As described in the Chairman's Statement and Business Review and as detailed in the financial statements and related notes, the current economic environment has adversely impacted the Group's levels of business, profitability and cash flows from those either previously anticipated by the Board or as compared to the previous year.

The Group recorded a loss after tax for the year of £40.2 million (2008: profit of £6.7 million), principally as a result of charging net exceptional and other items with a post-tax cost of £49.4 million (2008: £3.3 million) (see note 4), and a net cash outflow before net proceeds from borrowings of £19.4 million (2008: net cash outflow of £30.3 million, also stated before receipt of the net proceeds of the Convertible Notes). Nonetheless, the Group had working capital headroom of £17.2 million at 30 April 2009 (2008: £37.0 million) and operated within its banking covenants and met all capital and interest payments as they fell due on its borrowings during the year and in the subsequent period to date.

The Directors have prepared forecasts which show that the Group will have sufficient funds to meet its liabilities as they fall due, and that it will continue to meet its banking covenants, for a period of at least twelve months from the date of approving these financial statements.

These forecasts include key assumptions around the future performance of the Group, which require the Group to, inter alia, i) attain sufficient cash collection levels on a sustained basis; ii) continue to monitor and manage its working capital within available facilities; iii) manage the cost base in response to changes in debtor collection and settlement adjustment levels and its expected share of the market; and iv) manage its fleet requirements against anticipated activity levels and within available fleet facility levels or source required vehicles via alternate means. The assumptions are based on measures that have already been implemented, or which the Directors consider are reasonable to assume can be implemented and which will continue to be monitored and evaluated in order to achieve the forecasts.

Settlement estimation

The Group recognises revenue, claims in progress and trade receivables at amortised cost using the effective interest rate method after an allowance for any discounts that are expected to arise under the terms of the ABI General Terms of Agreement and net of any other settlement adjustments expected to arise on the settlement of claims. This judgment is made on the basis of historical and expected net recovery from the settlement of claims and is influenced by the approach taken towards recovery of amounts claimed.

  1. Basis of preparation (continued)

Settlement estimation (continued)

The uncertainty surrounding these estimation processes has increased in the current year as, in common with other businesses operating in our sector and for the reasons set out in the Business Review, we have seen settlement adjustment levels rise from 1 January 2009 to the year end. Whilst cash collection levels increased over this period, settlement adjustments on claims closed since the beginning of the calendar year have substantially exceeded previously anticipated and provided levels. The Group has considered the impact of this on the carrying value of trade receivables and claims in progress as at 30 April 2009 and has made an Exceptional Settlement Adjustment provision of £27.9 million (2008: £nil), which together with the Exceptional Settlement Adjustment of £16.3 million (2008: £nil) actually experienced in the last four months of the year, has resulted in an aggregate Exceptional Settlement Adjustment charge in the year of £44.2 million (2008: £nil) (see note 4).

Whilst the Directors believe that they have a reasonable basis for deriving the settlement estimation adjustments as reflected in the financial statements as at 30 April 2009, the ultimate settlements agreed through negotiation with, or litigation against, at fault parties' insurers in relation to the outstanding claims in progress and trade receivables may be higher or lower than that which has been estimated in the preparation of the financial statements and therefore represents a significant risk and a material uncertainty.

Going concern basis

The financial statements have been prepared on a going concern basis, which assumes that the Group has adequate resources to continue in operational existence for the foreseeable future.

The Group's working capital facilities are of a committed nature and do not expire until 30 September 2010. However, the validity of the going concern assumption depends in part on the Group being able to collect its trade receivables on a sufficient and timely basis at a level of settlement adjustment that will enable the Group to operate within its working capital facilities and associated covenants which, as set out above, represents a significant risk and a material uncertainty.

The going concern basis further depends upon the Group having either sufficient funding to finance its planned vehicle acquisition volumes or to be able to source vehicles from alternate rental providers so as to be able to replace maturing fleet and manage the size and mix of the fleet in response to levels of business.

Historically, the Group has used a wide variety of funders, including highly rated financial institutions and vehicle manufacturer related finance houses, to finance the purchase of its vehicle fleet. These facilities have been of an uncommitted nature and over recent months several of the Group's funders have withdrawn the headroom on available facilities as they themselves have responded to the pressures brought on them by the credit crunch. The Group has therefore commenced discussions with a number of fleet funding providers including, at their request, several of those funders who have only recently withdrawn their facility headroom, with a view to securing longer term committed facilities on amended terms. The Board believe that these discussions can be concluded satisfactorily however the availability and terms of these committed facilities is still to be determined and there is no guarantee that they will either be obtained or that they will be obtained on terms acceptable to the Board and hence this represents a significant risk and a material uncertainty.

The Directors have already implemented measures to reduce the cost base and restrict capital outflow in order to preserve cash and headroom against existing funding facilities. Further actions that either have been or will be implemented as appropriate to manage cash flows include the agreement of block settlements, curtailment of low margin working capital consumptive credit repair activities, flexibility around vehicle purchase commitments and the ability to rent vehicles on a short term basis from alternate sources alleviating the need for vehicle finance.

The Directors acknowledge that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group's ability to continue to operate within its existing banking facility and covenants, to finance its planned vehicle acquisition volumes and consequently to continue as a going concern. The financial statements do not include the adjustments required to the carrying values of assets, to reflect the fact that the Group may be unable to realise its assets at the values they are stated at in these financial statements nor adjustments to liabilities to reflect additional liabilities arising, were the Group unable to continue as a going concern.

  1. Basis of preparation (continued)

Going concern basis (continued)

After making enquiries, whilst considering the uncertainties described above and after taking account of the plan to reduce settlement adjustments on improved cash collections, the curtailment of credit repair activities and the expectation of being able to implement the required vehicle fleet management measures, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the financial statements.

2. Change in accounting policy, restatement of prior year comparatives and change in accounting estimate

Change in accounting policy - prior year adjustment

In all previously reported financial statements and Interim Reports, in adopting IAS 39 and IAS 18, and in particular regarding the determination of the fair value and the nominal amount (after allowances for settlement adjustments) of trade receivables and claims in progress, the Board has made assumptions that the future settlement periods likely to be attained from improved operational cash collection processes would show material shortening from the settlement periods suggested by the debtor days outstanding at each previous period end. As such the magnitude of the effective interest residing within the initial recognition of revenue (and therefore trade receivables and claims in progress) has previously been considered to be immaterial; with the consequence that there were no deductions from revenue to be subsequently released to the income statement as finance income over the length of the anticipated collection period.

As at 30 April 2007 the Board considered the worsening of the debtor day period (from 130 days to 176 days) to reflect the uncertainty introduced by the Enforceability Challenge (as defined in the financial statements for the year ended 30 April 2008). The Enforceability Challenge was eventually defeated in November 2007, a much longer period than anticipated by the Board in April 2007. Also, despite the balance sheet strengthening facilitated by the £50.0 million Convertible Loan Note issued in January 2008, debtor day periods continued to worsen through to 30 April 2008 (to 227 days). The Board believed that debtor day periods had peaked in April 2008 and that improved operational processes, the strengthened balance sheet and litigation collection efforts would combine to drive shorter collection periods thereafter. The effects of the credit crunch from the autumn of 2008 and the liquidity issues faced by some insurers as set out in the Business Review are believed by the Board to have contributed to debtor days continuing to rise to 269 days (stated before the net off of the Exceptional Settlement Adjustment provision) by 30 April 2009.

The Board has also set out in the Business Review the background to the Exceptional Settlement Adjustment charged in the results for the year ended 30 April 2009. The Board believes that its current cash collection processes will now see a progressive reduction in debtor day periods, this being facilitated by litigation and by the Exceptional Settlement Adjustment potentially facilitating more flexible negotiation with, and therefore quicker payment profiles from, insurers.

However, from the levels at which debtor day collection periods currently stand (269 days before the Exceptional Settlement Adjustment), the timescales for improvements in debtor days expected by the Board suggest that the effect of discounting trade receivables and claims in progress as at 30 April 2009 is no longer immaterial in the context of the results reported for the year.

IAS 8 requires entity management to change accounting policies where it results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity's financial position.

As a result, for the financial statements for the year ended April 2009, the Board has changed its approach to accounting for the effective interest rate and is now reflecting the impact of discounting given the collection periods being experienced. This change includes a restatement of the comparatives for 2008, being a reduction in revenue consequent from discounting trade receivables and the recognition in other operating income of finance income accruing on a time basis by reference to the principal outstanding and the effective interest rate applicable. In so doing, the Board has considered the requirement of the IASB Framework paragraph 39 that the financial statements should be comparable "through time in order to identify trends in its financial position and performance".

2. Change in accounting policy, restatement of prior year comparatives and change in accounting estimate (continued)

Restatement of prior year comparatives

The Board has historically treated not only all discounts arising under the GTA but also all other settlement adjustments arising on claim closure as generic industry "trade discounts" and, thereby in accordance with IAS 39, has deducted the aggregate of these amounts from revenue. The Board now treats settlement adjustments that are over and above the maximum GTA level of documented discounts as an impairment against the carrying value of trade receivables as opposed to additional trade discounts and as such they are charged to cost of sales. This serves to separate the treatment of GTA levels of discount from additional adjustments conceded for settlement. This is a disclosure point only as the impact on the results for the year ended 30 April 2008 is to increase both revenue and cost of sales by £2.2 million with profit before tax unchanged.

The impact on the prior year comparatives of the change in accounting policy and the amendment to the disclosure of settlement adjustments described above is as follows:

	As previously reported	Change in accounting policy	Reclassification of settlement adjustments	Restated
Year ended 30 April 2008	£'m	£'m	£'m	£'m
Revenue	165.1	(5.4)	2.2	161.9
Cost of sales	(108.0)	-	(2.2)	(110.2)
Other operating income	-	3.2	-	3.2
Profit before tax	12.1	(2.2)	-	9.9
Taxation	(3.8)	0.6	-	(3.2)
Profit for the year	8.3	(1.6)	-	6.7
Claims in progress	16.2	(0.5)	-	15.7
Trade receivables	113.7	(3.8)	-	109.9
Deferred tax	(4.5)	1.2	-	(3.3)
Shareholders' funds	71.8	(3.1)	-	68.7

Change in accounting estimate

During the year the Board has reviewed the basis on which depreciation of the Group's motor vehicles is calculated. From October 2008 the ongoing monthly depreciation charge for each vehicle, on a monthly basis, is determined by reference to its expected residual value at its intended disposal date. The expected residual value is determined from a review of data provided by CAP, with the difference between its current net book value and the anticipated residual value being depreciated over the remaining period of ownership to expected disposal date. Net book values as at 31 October 2008 were also reduced by the Fleet Impairment referred to in the Business Review.

IAS 8 requires disclosure of the impact of a change in basis of applying an accounting policy on both the current and future periods. Had the fleet continued to be depreciated on the previous straight line basis of 22.5% per annum, the depreciation charge for the year ended 30 April 2009 would have been c.£5.8 million higher than reported in these financial statements. This difference does not, however, take into account the effect that the Fleet Impairment would have had on the depreciation charge under the previous (straight line) basis of estimation.

Monthly vehicle depreciation now fluctuates with changes in CAP forecast residual values and is therefore now more variable than under the previous straight line basis. Consequently it is not possible to reliably estimate the effect of this change on depreciation charges in future periods. It will however carry the advantage of immediately reflecting any further positive or negative variances in expected CAP values.

  3. Revenue and other operating income

An analysis of the Group's revenue and other operating income is as follows:

	Year ended	Year ended
	30 April	30 April
	2009	2008
		Restated (note 2)
	£'m	£'m
Delivery of accident management and related services	122.7	121.6
Credit repair	44.3	40.3
Revenue before exceptional charge	167.0	161.9
Exceptional Settlement Adjustment	(35.0)	-
Revenue	132.0	161.9
Other operating income before exceptional charge	5.6	3.2
Exceptional adjustment to operating income	(0.6)	-
Other operating income	5.0	3.2
	137.0	165.1

The Exceptional Settlement Adjustment relates principally to revenue arising on the delivery of accident management and related services.

Other operating income consists of interest income in relation to claims in progress and trade receivables, which is accrued on a time basis by reference to outstanding trade receivables and at the effective interest rate applicable.

4. Exceptional and other items

	Year ended	Year ended
	30 April	30 April
	2009	2008
	£'m	£'m
Exceptional items
Exceptional Settlement Adjustment:
- charged as an adjustment to revenue	35.0	-
- charged to cost of sales as an impairment to receivables	8.6	-
- charged as an adjustment to other operating income	0.6	-
	44.2	-
Fleet impairment - charged to cost of sales	19.6	-
Cost reduction expense:		-
- charged to cost of sales	4.2	-
- charged to administrative expenses	0.8	-
	5.0	-
Accident Management Scheme launch costs	-	1.1
Refinancing costs	-	0.9
Total exceptional items	68.8	2.0
Other items
Amortisation of acquired intangible assets	0.5	0.5
Cost of share based payments	0.9	0.6
Change in fair value of derivative financial liability	(1.5)	0.9
Other items	(0.1)	2.0
Total exceptional and other items	68.7	4.0

4. Exceptional and other items (continued)

Exceptional settlement adjustment

The Group recognises revenue and trade receivables after an allowance for any discounts that are expected to arise under the terms of the ABI General Terms of Agreement and net of any expected adjustments arising on the settlement of claims. This judgment is made on the basis of historical and expected net recovery from the settlement of claims and is influenced by the approach taken towards recovery of amounts claimed.

Whilst the Group increased cash collections to £157.2 million for the year (2008: £133.0 million) we have, we believe in common with other businesses operating in our sector, seen settlement adjustment levels rise since 1 January 2009 and settlement adjustment levels on claims closed more recently exceeded previously anticipated and provided levels. Given the size and origin of the recent increase in settlement adjustment levels we have disclosed its effect as an exceptional item comprising two parts. The Group has considered the potential impact of this on the carrying value of trade receivables and claims in progress as at 30 April 2009 and has made an exceptional provision against these balances of, in aggregate, £27.9 million (2008: £nil), which together with the exceptional enhanced settlement adjustment of £16.3 million (2008: £nil) actually experienced in the last four months of the year, has resulted in an aggregate exceptional charge of £44.2 million (2008: £nil).

The exceptional enhanced settlement adjustment of £16.3 million experienced in the last four months of the year was determined as being the difference between the settlement adjustments which arose at claim closure less the previously provided settlement level, which was based on historical experience prior to 1 January 2009. The £27.9 million increase from previously provided levels to the higher settlement adjustment levels now applied to closing trade receivables and claims in progress as at 30 April 2009 has been determined as a result of the increase in these experienced settlement rates and the approach taken towards future recovery of amounts claimed.

The Board believes it has implemented improved cash collection processes recently in response to insurer payment profile changes. Litigation will be used robustly to maximise collection levels and in recent months we have introduced litigation process improvements to counter and neutralise defence tactics being adopted by insurers. We expect these process improvements to materially benefit both the speed and magnitude of collections and to the extent they materialise the £27.9 million provision may not be crystallised. This is certainly an objective, always bearing in mind our primary objective of driving improved cash collections to a minimum of cash flow break-even. The material uncertainty surrounding the estimation process for settlement adjustments is described in note 1.

Fleet impairment

Events since mid-September, particularly in the banking sector, led to a marked deterioration in the outlook for the UK economy and, with it, a fall in consumer confidence. As a result there was a significant reduction in demand for new and used vehicles that materially depressed forecast residual fleet values.

In light of these events the Group reviewed the carrying value of every vehicle in its fleet as at 31 October 2008 and determined the requirement for a consequent £19.6 million exceptional impairment charge.

The exceptional impairment charge was derived by firstly identifying each individual vehicle within the total fleet as an individual cash generating unit ("CGU"). The carrying value of each CGU was then compared to its recoverable amount, determined as the higher of its "fair value less costs to sell" or its "value in use", with the aggregation of each CGU impairment totalling £19.6 million.

The Group uses data obtained from CAP Motor Research ("CAP") as the basis for determining the Board's view of the residual values of each CGU.

Determination of "fair value less costs to sell" was based on the Board's view of CAP's December market value data less expected selling costs. Determination of "value in use" was based on the Board's projections of pre-tax cash flows arising from the use of each CGU over its expected period of ownership (typically up to 24 months) together with the Board's view of CAP's December projected disposal proceeds for each CGU at its intended disposal date. A pre-tax discount rate of 10%, based on the Group's weighted average cost of capital, was used to then discount the projected pre-tax cash flows (including disposal proceeds) to ascertain each CGU's "value in use".

  4. Exceptional and other items (continued)

Fleet impairment (continued)

The key assumptions were the pre-tax discount rate applied and the expected residual value determined by reference to CAP data as outlined above. Had the discount rate been 0.5 percentage points higher or lower, the impairment charge would have been £0.3 million higher / lower. A 1% change in assumed residual value would have changed the impairment by £0.5 million.

As referenced in the Business Review, whilst CAP Monitor valuations (from which we determined the Fleet Impairment and which we use to determine subsequent and ongoing depreciation charges) have improved slightly recently, the Board has not reversed any of the Fleet Impairment charge as these recent improvements are considered to have arisen from economic conditions that are short term in nature. The Group is benefitting from reduced depreciation charges as a result of the Fleet Impairment and subsequent CAP valuation movements with depreciation in the period being £5.8 million lower than it would otherwise have been.

Cost reduction expense

The Board became concerned during the first half of the year about the potential effects of a recession on the Group's profitability. The Group therefore started to take corrective action in Summer 2008, which continued into the second half, to reduce the level of exposure to adverse changes in fleet residual values and the level of risk associated with fleet. By re-negotiating commercial terms with a number of our referral partners the Group has avoided future fleet purchases of over £40.0 million in return for one-off commission payments in aggregate of £4.2 million (2008: £nil).

In addition, the Group incurred a one-off charge of £0.8 million (2008: £nil) as a result of rationalising its overhead cost base in light of lower levels of trading, the charge included headcount reduction costs and cancellation of its sponsorship of the BMW entry in the 2009 British Touring Cars Championship.

Amortisation of acquired intangible assets

The amortisation of acquired intangible assets is a non-trading and non-cash charge and has been excluded in determining adjusted profit.

Cost of share based payments

The cost of share based payments is also a non-trading and non-cash charge and has been excluded in determining adjusted profit.

Change in fair value of derivative financial liability

The change in fair value of the derivative financial liability, being the equity conversion option attaching to the Convertible Notes is driven by market factors largely beyond the Group's control and has therefore been excluded in determining adjusted profit.

Accident Management Scheme launch costs

During the prior period the Group incurred administrative expenses of £1.1 million launching Accident Management Schemes for and on behalf of newly acquired referring dealer and manufacturer partners. These costs were disclosed as exceptional items due to the significant magnitude of this investment.

Refinancing costs

On 15 June 2007 the Group announced that it had entered into a £45.0 million senior secured credit agreement with Morgan Stanley and as a result, certain of the Group's borrowings were redeemed. A charge in aggregate of £0.9 million was made in connection with this redemption, consisting of professional adviser fees of £0.8 million and £0.1 million of termination costs imposed by the terms and conditions of those facilities (charged to finance costs).

  5. Finance income and costs

	Year ended	Year ended
	30 April	30 April
	2009	2008
	£'m	£'m
Finance income
Interest income on bank balances	0.5	0.8
Finance costs
Bank borrowings	(3.7)	(4.1)
Obligations under finance leases	(8.0)	(7.1)
Convertible Notes	(5.6)	(1.7)
Total finance costs	(17.3)	(12.9)
Change in fair value of derivative financial liability	1.5	(0.9)
Net finance costs	(15.3)	(13.0)

The finance costs of the Convertible Notes of £5.6 million (2008: £1.7 million) includes a charge of £2.8 million (2008: £0.9 million) in respect of the 5.50% coupon payable twice yearly and £2.8 million (2008: £0.8 million) in aggregate in respect of accreted interest, amortisation of issue costs and amortisation of the value attributed to the equity conversion component at inception, which has been separately recognised as a derivative financial liability (note 13).

6. Taxation

The standard rate of corporation tax in the UK reduced from 30% to 28% with effect from 1 April 2008. As a result, the average standard rate of corporation applicable to the Group for the year was 28% (2008: 29.8%). The tax credit for the year is lower (2008: a higher charge) than the average standard rate of corporation tax in the UK of 28% as explained below:

	Year ended	Year ended
	30 April	30 April
	2009	2008
		Restated (note 2)
	£'m	£'m
(Loss) / profit before tax	(55.4)	9.9
(Loss) / profit before tax multiplied by the rate of corporation tax in the UK of 28% (2008: 29.8%)	(15.5)	3.0
Effect of:
Expenses not deductible for tax purposes	0.1	0.6
Adjustments in respect of prior years	0.2	(0.4)
Deferred tax on share based payment charges	0.2	-
Adjustment in respect of change in tax rate	(0.2)	-
Tax on (loss) / profit on ordinary activities	(15.2)	3.2

The Group has a deferred tax asset of £8.2 million (2008: liability of £3.3 million) of which £6.7 million (2008: £nil) arose in connection with the taxable loss for the year, which is available for offset against future tax charges of the company in which they arose. The Group has an expectation that taxable profits will be generated in future years and has accordingly recognised a deferred tax asset of £6.7 million (2008: £nil) in respect of the losses. Changes to the UK capital allowances regime will reduce the level of annual capital allowances available on a proportion of the Group's future fleet purchases, the full impact of which is still being assessed.

  7. Basic earnings per share

Basic loss / earnings per share is calculated by dividing the loss / earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year.

Details of the loss / earnings and weighted average number of ordinary shares used in the calculations are set out below:

	Year ended	Year ended
	30 April	30 April
	2009	2008
		Restated (note 2)
(Loss) / earnings attributable to ordinary shareholders (£'m)	(40.2)	6.7
Weighted average number of ordinary shares	71,014,214	71,138,544
Basic (loss) / earnings per share (pence)	(56.6)	9.4

Adjusted basic earnings per share

To understand the underlying trading performance, the Directors consider it appropriate to disclose basic earnings per share before exceptional and other items. The calculation of adjusted earnings per share is set out below:

	Year ended	Year ended
	30 April	30 April
	2009	2008
		Restated (note 2)
(Loss) / earnings attributable to ordinary shareholders (£'m)	(40.2)	6.7
Post-tax cost of exceptional items (£'m)	49.6	1.4
Post-tax (income) / cost of other items (£'m)	(0.2)	1.9
Adjusted profit on ordinary activities after taxation (£'m)	9.2	10.0
Weighted average number of ordinary shares	71,014,214	71,138,544
Basic (loss) / earnings per share (pence)	(56.6)	9.4
Cost of exceptional items (pence)	69.9	2.0
(Income) / cost of other items (pence)	(0.3)	2.7
Adjusted basic earnings per share (pence)	13.0	14.1

8. Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has three sources of dilutive potential ordinary shares, namely the Convertible Notes, share options and the Morgan Stanley Warrant.

The Convertible Notes had an initial conversion price of 107.7 pence per ordinary share. As set out in the Company's notice of extraordinary general meeting dated 7 December 2007 and in accordance with the terms and conditions of the Convertible Notes contained in the offering circular dated 4 January 2008 (copies of each being available on the Company's website), the conversion price of the Convertible Notes was subject to adjustment on the first anniversary of their issue. Accordingly, on 9 January 2009 the conversion price was adjusted to 75.4 pence per ordinary share.

For the purposes of the fully diluted weighted average number of shares, the Group is required to assume that the Convertible Notes are converted at the above price of 75.4 pence per ordinary share, which would result in the issue of 66.3 million shares. As the Convertible Notes were issued on 8 January 2008 the time apportioned adjustment to the weighted average number of shares for the prior year was 20.7 million. The Group's earnings have been adjusted for the post-tax finance costs associated with the Convertible Notes.

  8. Diluted earnings per share (continued)

For the share options and Morgan Stanley Warrant the number of potential dilutive shares represents the number of ordinary shares that would be issued upon their exercise, net of the number of ordinary shares that could have been acquired at fair value by the Company based on the monetary value of their subscription rights. Fair value is determined as the average market price of the Company's shares during the year. The share options and Morgan Stanley Warrant are only assumed to be potentially dilutive to the extent that they were 'in the money' by reference to the average market value of the Company's ordinary shares during the year.

Potential ordinary shares are treated as dilutive only when their conversion to ordinary shares would decrease earnings per share or increase loss per share. The post-tax finance costs of the Convertible Notes for the period were £2.6 million (2008: £2.1 million). As a consequence the issue of 66.3 million shares that would result from conversion means that the loss per share would decrease. Diluted loss per share is therefore equal to the basic loss of 56.6 pence per share (2008: diluted earnings of 9.5 pence per share).

Adjusted diluted earnings per share

The calculation of adjusted diluted earnings per share is set out below. It assumes the same adjustments as shown in note 7 together with the post-tax finance costs of the Convertible Notes as set out below:

	Year ended	Year ended
	30 April	30 April
	2009	2008
		Restated (note 2)
(Loss) / earnings attributable to ordinary shareholders (£'m)	(40.2)	6.7
Post-tax finance costs of Convertible Notes (£'m)	2.6	2.1
Post-tax cost of exceptional items (£'m)	49.6	1.4
Post-tax (income) / cost of other items (£'m)	(0.2)	1.9
Post-tax income / (cost) of change in fair value of derivative financial liability included within other items (£'m)	1.4	(0.9)
Adjusted profit on ordinary activities after taxation (£'m)	13.2	11.2
Weighted average number of potential ordinary shares - diluted	137,411,598	92,976,552
(Loss) / earnings per share (pence)	(29.3)	7.2
Post-tax finance costs of Convertible Notes (pence)	1.9	2.2
Cost of exceptional items (pence)	36.1	1.5
Cost of other items excluding change in fair value of derivative financial liability (pence)	0.9	1.1
Adjusted diluted earnings per share (pence)	9.6	12.0

9. Equity dividends

The Directors do not recommend payment of a final dividend for the year ended 30 April 2009 (2008: 1.5 pence per share). No interim dividend was paid (2008: 1.0 pence per share) resulting in a total dividend of £nil for the year ended 30 April 2009 (2008: 2.5 pence per share).

  10. Property, plant and equipment

	Leasehold property and improvements	Computer equipment	Fixtures and fittings	Motor vehicles	Total
	£'m	£'m	£'m	£'m	£'m
Cost
At 1 May 2007	2.1	1.8	1.6	82.4	87.9
Additions	0.3	1.0	0.3	85.3	86.9
Additions through business combinations	-	-	-	0.2	0.2
Transfer to assets held for sale	-	-	-	(0.5)	(0.5)
Disposals	-	(0.1)	-	(62.7)	(62.8)
At 30 April 2008	2.4	2.7	1.9	104.7	111.7
Additions	0.1	0.3	0.6	44.6	45.6
Transfer to assets held for sale	-	-	-	(1.6)	(1.6)
Disposals	(0.2)	-	-	(61.9)	(62.1)
At 30 April 2009	2.3	3.0	2.5	85.8	93.6
Depreciation
At 1 May 2007	0.1	0.6	0.4	12.9	14.0
Charge for the year	0.2	0.8	0.4	22.0	23.4
Transfer to assets held for sale	-	-	-	(0.2)	(0.2)
Disposals	-	-	-	(19.2)	(19.2)
At 30 April 2008	0.3	1.4	0.8	15.5	18.0
Charge for the year	0.2	0.8	0.6	19.5	21.1
Impairment	-	-	-	19.6	19.6
Transfer to assets held for sale	-	-	-	(0.6)	(0.6)
Disposals	-	-	-	(26.7)	(26.7)
At 30 April 2009	0.5	2.2	1.4	27.3	31.4
Net book value
At 30 April 2009	1.8	0.8	1.1	58.5	62.2
At 30 April 2008	2.1	1.3	1.1	89.2	93.7

11. Trade and other receivables

	30 April	30 April
	2009	2008
		Restated (note 2)
	£'m	£'m
Trade receivables	119.5	107.1
Exceptional Settlement Adjustment	(27.4)	-
Trade receivables - net	92.1	107.1
Other receivables	2.3	0.4
Prepayments and accrued income	2.6	2.4
	97.0	109.9

  11. Trade and other receivables (continued)

Trade receivables represent amounts receivable for the provision of services to customers. The expected adjustments arising on the settlement of receivables represents a critical judgement made by the Directors. The Directors have estimated the value of trade receivables to reflect the expected settlement amounts receivable on the basis of the prior experience of collection levels and anticipated collection profiles. Further details of the Exceptional Settlement Adjustment are set out in note 4.

Credit risk

Credit risk arises on trade receivables due to their magnitude and the nature of the claims settlement process. The Group recovers its charges for vehicle hire and the costs of repair of customers' vehicles from the insurer of the fault party to the associated accident or, in a minority of claims, from the fault party direct where they are a self insuring organisation. However, claims against motor insurance companies or self insuring organisations can be subject to dispute which may result in financial loss to the Group.

The Group manages this risk by ensuring that vehicles are only placed on hire and repairs to customers' vehicles carried out after a validation process that ensures to the Group's satisfaction that liability for the accident rests with another party. In the normal course of its business, the Group uses two principal methods to conclude claims: by negotiation with the insurer of the at-fault party and where a claim fails to settle within 120 days of billing, by litigation. A large proportion of these claims settle before or on the threat of litigation, but where they do not, formal proceedings are issued.

As trade receivables carry no contractual "due date" the term "past due" used in IFRS 7 is not considered relevant in the Group's circumstances and does not reflect the manner in which the Board considers credit risk. The Board reviews trade receivables according to the status of the claim through the in-house and solicitor processes and, in particular for claims sent to solicitors, whether they are "pre issue" or whether proceedings have formally been issued. The Group now targets the transfer of trade receivables from the in-house to the solicitor process when they are aged 120 days. An analysis of trade receivables based on these classifications is given below:

	30 April		30 April
	2009		2008
			Restated (note 2)
	£'m	%	£'m	%
Between 1 and 120 days old
In-House	30.3	90%	41.0	99%
At Solicitors
Pre-Issue	3.0	9%	0.5	1%
Proceedings Issued	0.4	1%	0.1	0%
	33.7	100%	41.6	100%
More than 120 days old
In-House	34.0	37%	25.4	36%
At Solicitors
Pre-Issue	23.7	26%	17.7	26%
Proceedings Issued	33.2	37%	26.2	38%
	90.9	100%	69.3	100%
Total before impairment
In-House	64.3	52%	66.4	60%
At Solicitors
Pre-Issue	26.7	21%	18.2	16%
Proceedings Issued	33.6	27%	26.3	24%
	124.6	100%	110.9	100%
IAS 39 effective interest deduction	(5.1)	-	(3.8)	-
Exceptional Settlement Adjustment	(27.4)	-	-	-
	92.1	-	107.1	-

  12. Non-current assets held for sale

At 30 April 2009, the Group had designated £1.0 million (2008: £0.3 million) of motor vehicles at net book value as 'available for sale' and was actively seeking buyers for those vehicles. These vehicles, which were sold soon after the balance sheet date, were expected to realise their carrying value and, accordingly, no gain or loss was recognised upon their transfer to current assets.

13. Financial liabilities

Borrowings

Details of borrowings are as follows:

	30 April	30 April
	2009	2008
	£'m	£'m
Current
Bank loans	0.4	0.5
Finance lease obligations	45.9	38.5
	46.3	39.0
Non-current
Bank loans	40.6	30.5
Finance lease obligations	29.6	58.8
Convertible Notes	50.5	47.7
	120.7	137.0
Total borrowings	167.0	176.0

Revolving credit facility and bank loans

The Company has a senior secured credit facility with Morgan Stanley Bank International Limited in respect of banking facilities of up to £40.0 million ("Facility") maturing on 30 September 2010. The Facility comprises a term loan of £30.0 million and a £10.0 million revolving credit facility on which interest is charged at LIBOR plus 5%. The Facility is secured by a fixed and floating charge over certain of the Company's and its subsidiary undertakings' assets.

Bank loans of £41.0 million as at 30 April 2009 comprise £40.0 million drawn down from the Facility (2008: £30.0 million) and a £1.8 million (2008: £2.2 million) five year term loan in relation to leasehold property improvements at the Company's Alpha 1 headquarters, which are stated net of aggregate unamortised issue costs of £0.8 million (£0.4 million was amortised during the year through finance costs). The average effective interest rate for the year on these banking facilities and loans was 10.2% (2008: 10.5%).

Convertible Notes

On 8 January 2008 the Group issued £50.0 million 5.50% convertible notes due 2013. Morgan Stanley & Co International plc acted as lead manager for the offering, the proceeds to the Group of which were £46.6 million net of associated expenses of £3.4 million.

The Convertible Notes constitute senior, unsubordinated, direct, unconditional and unsecured obligations of the Company, carry a cash payable coupon of 5.50% payable semi-annually in arrears on 8 July and 8 January commencing on 8 July 2008, and had an initial conversion price of 107.7 pence per ordinary share (which represented a 20% premium above the reference price of 89.8 pence per share which was set at the time of announcing the intention to issue the Convertible Notes).

As set out in the Company's notice of extraordinary general meeting dated 7 December 2007 and in accordance with the terms and conditions of the Convertible Notes contained in the offering circular dated 4 January 2008 (copies of each being available on the Company's website), the conversion price of the Convertible Notes was subject to adjustment on the first anniversary of their issue. Accordingly, on 9 January 2009 the conversion price was adjusted to 75.4 pence per ordinary share.

  13. Financial liabilities (continued)

Convertible Notes (continued)

Holders of the Convertible Notes may convert the Convertible Notes into ordinary shares at the above conversion price at any time until the date falling 14 days prior to 8 January 2013. To the extent the Convertible Notes have not previously been converted, purchased and cancelled or redeemed, the Company will redeem the Convertible Notes on 8 January 2013 in cash at their accreted principal amount reflecting an overall yield to maturity of 9.75% (whereby for every £50,000 principal amount then still outstanding, £63,286 will be payable in cash).

The values of the liability component and equity conversion option component were determined as at the date of issue of the Convertible Notes. The fair value of the liability component, which is disclosed separately on the balance sheet within non-current liabilities, was calculated using a market interest rate for an equivalent non-convertible instrument. The remaining amount, representing the value of the equity conversion option, is classified as a derivative financial liability in non-current borrowings.

The liability component initially recognised upon issue of the Convertible Notes was as follows:

	£'m
Face value of Convertible Notes issued on 8 January 2008	50.0
Equity conversion option component (see below)	(0.6)
Issue costs	(3.4)
Liability component upon issue	46.0

The amount recognised in the balance sheet in relation to the Convertible Notes is as follows:

	30 April	30 April
	2009	2008
	£'m	£'m
At 1 May	47.7	-
Liability component recognised upon issue	-	46.0
Finance charges accrued (note 7)	5.6	1.7
Finance charges paid	(2.8)	-
Liability component at 30 April	50.5	47.7

Derivative financial liabilities

Details of derivative financial liabilities are as follows:

	30 April	30 April
	2009	2008
	£'m	£'m
At 1 May	1.5	-
Recognised upon issue of Convertible Notes	-	0.6
Movement in fair value during the year	(1.5)	0.9
At 30 April	-	1.5

  14. Deferred tax

The movement in the Group's deferred tax liabilities is shown below:

	Restated (note 2)
	£'m
At 1 May 2007	4.7
Prior year adjustment (note 2)	(0.6)
Credited to the income statement	(0.8)
At 30 April 2008	3.3
Credited to the income statement	(11.5)
Deferred tax asset recognised	8.2
At 30 April 2009	-

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% (2008: 28%). The liability, which is undiscounted, is analysed below:

	30 April	30 April
	2009	2008
		Restated (note 2)
	£'m	£'m
Accelerated capital allowances	(2.2)	3.9
Tax losses	(6.7)	-
Other timing differences	0.7	(0.6)
Undiscounted deferred tax (asset) / liability	(8.2)	3.3

The Group has recognised an asset of £6.7 million in respect of tax losses (2008: £nil) that are available for offset against future tax charges of the company in which they arose. The Group has an expectation that taxable profits will be generated in future years and has accordingly recognised a deferred tax asset of £6.7 million (2008: £nil) in respect of the losses.

15. Share capital

	30 April	30 April
	2009	2008
	£'m	£'m
Authorised
200,000,000 ordinary shares of 5p	10.0	10.0
Allotted, issued and fully paid
71,138,544 ordinary shares of 5p	3.6	3.6

Purchase of own shares

On 16 July 2008 the trustee of the Group's Long Term Incentive Plan ("'LTIP") acquired 200,000 ordinary shares of 5p each at a price of 55.4 pence per ordinary share. These ordinary shares were purchased to hedge the liability of previous awards made under the LTIP. The total holding of the LTIP following this transaction is 200,000 Ordinary Shares, equating to 0.28% of the Company's issued share capital.

Convertible Notes

The Group has £50.0 million of Convertible Notes in issue, which carry a conversion price of 75.4 pence per ordinary share. Further details are given in note 13.

  16. Cash generated from operations

Reconciliation of net profit to cash generated from operations:

	Year	Year
	ended	ended
	30 April	30 April
	2009	2008
		Restated (note 2)
	£'m	£'m
(Loss) / profit for the year	(40.2)	6.7
Depreciation and other non-cash items:
Depreciation	21.1	23.4
Fleet impairment	19.6	-
(Profit) / loss on disposal of vehicles, plant and equipment	(1.1)	1.3
Amortisation of intangible assets	0.6	0.6
Share based payments	0.9	0.6
Changes in working capital:
Decrease / (increase) in trade and other receivables	14.4	(44.8)
Decrease in claims in progress	5.1	0.5
Increase in payables	5.5	4.5
VAT recovered on fleet additions	8.2	15.9
Finance income	(0.5)	(0.8)
Finance costs	17.3	12.9
Change in fair value of derivative financial liability	(1.5)	0.9
Tax	(15.2)	3.2
Cash generated from operations	34.2	24.9

17. Reconciliation of cash and cash equivalents to net borrowings

	Year	Year
	ended	ended
	30 April	30 April
	2009	2008
	£'m	£'m
(Decrease) / increase in cash and cash equivalents in the period	(9.8)	20.1
Capital element of finance lease payments	75.1	81.8
Proceeds from issue of Convertible Notes net of issue costs	-	(46.6)
Proceeds from borrowings	(10.0)	(33.9)
Repayment of borrowings	0.4	30.1
Decrease in net borrowings resulting from cash flows	55.7	51.5
Inception of finance leases	(53.3)	(101.9)
Increase in accrued Convertible Notes interest included in net debt	(2.1)	(1.7)
Derivative financial liability excluded from net debt	-	0.6
Amortisation of debt issue costs	(1.1)	(0.7)
Borrowings acquired with subsidiary	-	(0.2)
Increase in net borrowings during the period	(0.8)	(52.4)
Net borrowings at 1 May	(149.0)	(96.6)
Net borrowings at 30 April	(149.8)	(149.0)

  18. Analysis of movement in net borrowings

	As at			As at
	1 May		Non-cash	30 April
	2008	Cash flows	items	2009
	£'m	£'m	£'m	£'m
Cash and cash equivalents	27.0	(9.8)	-	17.2
Other bank loans	(31.0)	(9.6)	(0.4)	(41.0)
Finance leases	(97.3)	75.1	(53.3)	(75.5)
Convertible Notes	(47.7)	-	(2.8)	(50.5)
Net borrowings	(149.0)	55.7	(56.5)	(149.8)

19. Capital commitments

At 30 April 2009 the Group is not committed to any future investments or capital expenditure plans other than the acquisition of vehicles under finance lease arrangements in the normal course of business.

Capital commitments relate to the replacement of some existing motor vehicles and the purchase of new motor vehicles. The purchase of new motor vehicles is contingent upon specific motor dealers operating an exclusive relationship with Accident Exchange Limited in respect of the introduction of credit hire claims involving their customers.

Included in capital commitments due within one year are confirmed orders for motor vehicles amounting to £1.3 million (2008: £12.4 million) ordered in the normal course of business, which are not contingent on an exclusive relationship being upheld.

Capital commitments for motor vehicles at the year end, which are contingent upon an exclusive relationship being upheld by our referring partners and on the maximum expected referral volumes being received from each referrer are analysed as follows:

	30 April	30 April
	2009	2008
	£'m	£'m
In one year or less	18.7	85.1
Between one and five years	11.6	16.3
	30.3	101.4

20. Other information

The financial information in this results announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 but has been extracted from statutory accounts.  The statutory accounts for the year ended 30 April 2008 have been filed with the Registrar of Companies and those for the year ended 30 April 2009 will be published and filed in due course.  

The auditors' reports on the statutory accounts for the year ended 30 April 2008 and for the year ended 30 April 2009 were unqualified and do not contain a statement under Sections 498 (2) or (3) of the Companies Act 2006, however for the year ended 30 April 2009 the auditors' report included reference to matters to which the auditors drew attention by way of emphasis of matter without qualifying the report. The matters referred to in the auditors' report relating to going concern and settlement estimation are described in note 1 'Basis of preparation' and these matters indicate the existence of material uncertainties. 

Whilst the financial information included in this results announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this results announcement does not itself contain sufficient information to comply with IFRSs. The Group's full financial statements for the year ended 30 April 2009 will be posted to shareholders and delivered to the Registrar of Companies in due course. Copies will be available from the Company Secretary, Alpha 1, Canton Lane, Hams Hall, Birmingham, B46 1GA or from the Group's website www.accidentexchange.com.

  20. Other information (continued)

The Annual General Meeting will be held at the offices of DLA Piper (UK) LLP, Victoria Square House, Victoria Square, Birmingham, B2 4DL at 11 am on Thursday 17 September 2009.

ENDFR RPMMTMMMTTBL

---

Related Shares:

ACE.L