27th Nov 2009 07:00
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FOR IMMEDIATE RELEASE |
27 November 2009 |
Accident Exchange Group Plc
("Accident Exchange" or the "Group")
PERIOD-END TRADING UPDATE
STRATEGIC REFOCUS AND COST REDUCTIONS
The Board of Accident Exchange Group Plc announces the following trading update for the six months ended 31 October 2009 and its intention to refocus its business on its traditional prestige automotive business. This announcement should be read in conjunction with the Interim Management Statement and Update on Legal Issues announcement of 17 and 25 September 2009 respectively.
TRADING
Overall rental days for the first half were up by 2.6% to 585,000 (2008: 570,000). With the effects of the recession continuing, higher margin prestige rental days were down 20% on the comparative period, being offset by lower margin mainstream rental days which were up 30%. Overall utilisation was improved to 66% for the period (H1 2008: 60%).
The level of settlement adjustments conceded to drive cash collections over the period has also been materially greater than management's expectations. The Board attributes this largely to insurers' appetite within the period to defer payments in reliance on the Autofocus rate evidence as explained in recent announcements. The effect of these higher settlement adjustments, together with the consequential increase in the level of provision that is now expected to be applied against open claims at the period end, will result in the Group reporting a loss for the six months to 31 October 2009. The increase in the provision is a non cash charge in the period and will continue to be reviewed based on the actual level of settlement adjustments over the second half of the year; a period where we will continue to demonstrate to insurers that their use of Autofocus rate evidence is unsafe whilst also seeking to ensure that cash collections meet required levels.
AUTOFOCUS UPDATE
We are still quantifying the scale of under-recoveries attributable to the reliance by the Courts on Autofocus evidence on spot hire rates over the last 12 months or so. We have identified over 6,500 cases where Autofocus evidence appears to have been deployed and it is our current intention to make applications to the Courts to re-open cases where it is clear that reliance on the Autofocus evidence by the trial Judge produced an under recovery based on unsound evidence. The Board acknowledges this process will take some time to conclude.
Nevertheless, the frequency of use and reliance on Autofocus data at trial by insurers is now diminishing and we understand that 13 of the 17 individuals against whom we have evidence of dishonesty have now left the employment of Autofocus. A further update will be provided when the half yearly report is released in December.
The positive effects of the Autofocus issue are emerging and, in particular, there has been an improvement over the past few weeks in the engagement of insurers and solicitors representing insurers regarding the settlement of claims without us having to progress claims to Court.
STRATEGIC REFOCUS AND COST REDUCTIONS
The Board has determined to take prompt and strong action to reduce our cost base to a level appropriate to current conditions. Fleet efficiencies already implemented, together with a further reduction in the total fleet to 4,658 as at 31 October 2009 (30 April 2009: 4,865), have enabled an increase in the age profile of the fleet and a £21.3 million reduction in fleet finance debt to £54.2 million at 31 October 2009 (30 April 2009: £75.5 million).
We now intend to refocus the Group's activities on our higher margin prestige automotive and manufacturer referral partners, historically the mainstay of operations. Over the next few months we will therefore reduce the size of our mainstream fleet further, thereby commencing materially fewer lower margin mainstream hire starts and reducing the working capital requirements of the business. To align the cost base of the prestige focused business, and after a period of consultation with our staff, annualised reductions in fleet and employment related costs of around £24 million are targeted to be attained by the end of the current financial year.
FINANCING
Given the effects of the above, and as the Group's three year working capital facility expires on 30 September 2010, the Group is currently undergoing a review of its financing structure with its principal banker and its asset backed lenders. Managing working capital remains the Group's primary objective, a task that the Board believes will benefit from the Autofocus issues having been unveiled, together with the planned reduced cost base and lower working capital requirements of reduced trading levels as narrated above. Until new facilities are concluded however, as there continues to exist a material uncertainty that cash collection and settlement levels may be lower than the Board is forecasting then, to the extent they are lower, the Group continues to face uncertainty as regards its ability to continue to comply with existing covenants and to operate within its existing bank facilities.
ANNOUNCEMENT OF RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2009
The announcement of the unaudited results for the six months ended 31 October 2009 is expected to be made towards the end of December 2009.
FORWARD LOOKING STATEMENTS
This statement 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.
END
CONTACTS:
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Accident Exchange Group Plc |
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Steve Evans, Chief Executive |
08703-009 781 |
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Martin Andrews, Group Finance Director |
08703-009 781 |
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Singer Capital Markets Limited |
020-3205-7500 |
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Shaun Dobson, Joint Head of Corporate Finance |
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Bankside |
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Steve Liebmann or Simon Bloomfield |
020-7367-8888 |
About Accident Exchange
Based in the West Midlands and with regional depots in Glasgow, Belfast, Warrington and Dartford, Accident Exchange delivers accident management and other solutions to automotive and insurance related sectors. Fully listed, the stock code is LSE: ACE.
Related Shares:
ACE.L