10th Apr 2007 07:02
Accident Exchange Group PLC10 April 2007 FOR IMMEDIATE RELEASE 10 April 2007 Accident Exchange Group Plc ("Accident Exchange" or "the Company") TRADING UPDATE At the time of the trading update issued on 8 February 2007, the Board ofAccident Exchange (the "Board") reaffirmed its view that the results for theyear ending 30 April 2007 would be biased towards the second half of thefinancial year and noted that, although rental days had shown strong progressivegrowth (Q3 being 28% up on the previous quarter and 63% up on the comparableperiod last year), the rate of growth in Q3 was reported as being below theBoard's previous guidance. As the result of a number of factors, which are set out below, the Board hasreduced further its expectations for the year to 30 April 2007. Rental Day Growth Rental days in February and March have continued to show absolute growth monthon month, in prestige and more notably in mainstream rental days. However,overall growth has not met the Board's revised expectations and thereforerevenue for the final quarter of the current year will be below the Board'sforecast at the time of the previous trading update. Rental day growth in thelast quarter of the financial year ending 30 April 2007 is now expected to beapproximately 14% up on Q3 (approximately 80% up on the comparable period lastyear). Settlement Process and Cash Receipts The industry and the Company utilises various techniques to conclude its claimsagainst the insurer of the 'at fault party' to a motor accident. These methodsinclude either negotiated block settlements or individual negotiation on a caseby case basis and, where the claim fails to settle inside the 90 day periodunder the terms of the ABI General Terms of Agreement, to litigation. It is'ordinary course of business' that this involves our client (the 'no faultparty' to the accident) issuing formal litigation proceedings against thenegligent driver to recover the hire charges which are paid by his/her insurancecompany. A percentage of these claims settle on the threat of litigation but,where they do not, formal proceedings will be issued and these claims may thenbe defended by the third party insurer, their solicitors instructed and, in whatis a minority of the claims we handle, the claims heard in court. In line with the growth in the business and, as anticipated by the Company aspart of its developing collection strategies, over the last year an increasednumber of claims have been processed by the Company's panel of approvedsolicitors. Since inception the Company has handled approximately 58,000 rentalstarts of which approximately 37,000 have settled and of the currentlyoutstanding 21,000 claims approximately 6,000 are either already with or in theprocess of being sent to our solicitor panel. In the last six months, ofapproximately 1,700 closed claims where proceedings had previously beenintimated or issued, over 97% were settled to the Company's satisfaction beforeor during the litigation process or, in some cases, at trial. One firm of defendant solicitors recently advanced a technical argument in anumber of their defences that sought to reopen the issue of the enforceabilityof the underlying terms and conditions used by the Company in its older rentalagreements. The Board believes and has been advised (see below) that this issuehas been previously decided in the appellate courts. This issue is focused onolder transactions which, in the main, date from 2004 and 2005. The defence hasbeen mirrored by a limited number of other defendant solicitors. Certaininsurers, to varying degrees have departed from their previously establishedpayment profiles to the Company in relation to these older cases whilstindividual cases are being determined. A number of leading insurers havecommunicated to the Company that they are not pursuing these arguments andseveral insurers have recently concluded bulk settlements with the Company inrespect of entire tranches of debt and negotiations continue with other insurersin respect of the same. Whilst the Company confirmed its position in relation to the above issue, ittemporarily slowed down the 'ordinary course of business' process of litigationwhich has now been resumed. As a result of all these issues outstanding debtordays have increased during the second half of the year to approximately 175 at31 March 2007 (31 October 2006: 141 days) and as at 5 April 2007 the Company wasutilising approximately 60% of its £20 million working capital bank facility. Legal Advice The Board has received opinion from leading counsel affirming the Board's viewas to the enforceability of the earlier versions of the Company's agreementsreferring to previous decisions in the appellate courts. In addition, changeswhich were made to the Consumer Credit Act 2006 which came into force in April2007, defeat the technical challenge as to enforceability in future instances. Outcome for the Current Year As a result of the lower than anticipated rental days, the change in rental daymix and the additional settlement discounts associated with recent cashcollections, the adjusted profit before tax* for the year ending 30 April 2007will be below expectations at approximately £18 million (2006: £16.3 million). The Company is undertaking a review of the appropriateness of its currentfinancing structure in view, inter alia, of the issues referred to above and theprojected growth profile of the business. Options under consideration includethe possibility of an equity fundraising. The Company intends to announce its full year results at the end of June anddoes not propose to make a further trading update before that time. Accident Exchange's Chairman, David Galloway stated: "The Board continues to have confidence that Accident Exchange has substantialpotential in a market which still has excellent prospects for growth." * Adjusted profit before tax is stated before amortisation of acquiredintangible assets, share based payments and exceptional costs incurred inrelation to the move to the Official List. Ends Contacts: Accident Exchange Group PlcSteve Evans, Chief Executive 08700-116 719Martin Andrews, Group Finance Director 08700-053 649 Numis Securities Ltd 020-7260-1000Chris Wilkinson, Corporate Broking BanksideSteve 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ACE.L