ACE.L Regulatory News (ACE)

2 May 2006 07:02

Accident Exchange Group PLC02 May 2006 02 May 2006 ACCIDENT EXCHANGE GROUP PLC TRADING UPDATE FOR THE YEAR ENDED 30 APRIL 2006 NEW CONTRACT WINS ACQUISITION OF DCML LIMITED FOR UP TO £12 MILLION ACQUISITION / SALE AND LEASEBACK OF NEW HQ PREMISES Accident Exchange Group Plc ("Accident Exchange" or "the Company"), the provider of replacement prestige vehicles to thenon fault parties involved in motor accidents, announces: • Period end trading update for the year ended 30 April 2006; • New contract wins; • The acquisition of DCML Limited ("DCML") for up to £12m; and • Back-to-back acquisition, sale and leaseback of new headquarters premises, yielding an exceptional profit of £2.6m. Steve Evans, Chief Executive of Accident Exchange said: "We are pleased to round off a year of excellent organic growth with our first acquisition. We have demonstrated our ability to win substantial new referrer accounts and to increase business from existing referrers. The acquisition of DCML, our new headquarters premises, increased headcount and expanded vehicle fleet provide Accident Exchange with the infrastructure and capability to sustain growth into the future." Year end trading update The Board is pleased to announce that it has maintained the strong upward momentum in the business during the second half of the year and that the results for the year ended 30 April 2006 will be broadly in line with market expectations.In addition, the results for the year are expected to include an exceptional profit of £2.6m in relation to the new headquarters premises, further details of which are provided below. During the second half year we have experienced strong growth in business activity levels, the number of hire starts andthe number of dealer referrers, New dealer accounts were added at an average rate of 27 dealers per month and the average claims per referrer per month grew by nearly 12% over the comparative period in 2005. In the light of the rate of business development and with the inception of business expected to be generated from contract hire and leasing companies (which has a different fleet mix) and with the number of substantial new contract opportunities in the pipeline, investment was made during the last quarter in both the headcount and vehicle fleet so that Accident Exchange has the resources to service anticipated levels of activity in the new financial year. In the short term this has had the recent effect of reducing fleet utilisation and operating margins. New business development 162 new dealer referral accounts have been added during the second half year including the 14 Toyota, Lexus, Peugeot andMazda dealerships owned by RRG, the seven Aston Martin, Bentley, Jaguar and Land Rover dealerships owned by Harwoods Group and the six Audi Dealerships owned by Hodgson Automotive Group. We are also delighted that 24 month agreements have been signed with the Audi, Lexus and Chrysler Jeep outlets of HR Owen plc. In addition, in April, the BMW dealers owned and operated by HR Owen plc and the eight BMW dealerships trading as Cooper BMW have all renewed their agreements with Accident Exchange; in the case of Cooper BMW, the new contract is for two years, twice the length of the original agreement. A number of contract hire and leasing companies have also been added as referral customers including Inchcape Fleet Solutions limited, Toomey Eurolease limited, Brammall & Jones Contract Hire Limited and Marshall Leasing Limited. Acquisition of DCML We are pleased to announce the acquisition of DCML for a total consideration of up to £12 million. DCML provides business software solutions across the automotive industry, from car manufacturers through their franchised dealers, into repairers and bodyshops. It has a suite of software products including Dealer Car Manager, a motor-dealership specific courtesy and rental fleet management system, designed to generate cost savings from operational efficiencies and to provide a revenue opportunity from the provision of insurance to service and sales customers (the revenue from which is shared between DCML, the dealer and the underwriting insurance company). DCML also operates a customer-direct test drive booking system for manufacturers, a "booking in" system for the collection and delivery of customer and courtesy vehicles, and booking and allocation of courtesy cars from dealer networks for roadside assistance requests. DCML had 840 dealer customers as at 30 June 2005 and currently has 966 dealercustomers. This acquisition will bring a number of benefits to Accident Exchange: • Its software solutions represent an important addition to Accident Exchange's systems backbone and its technology and service offering; • It creates the opportunity for further penetration into both manufacturers and significant dealer groups for both DCML's product offerings and the group's existing credit hire business; • There is relatively little overlap between DCML's dealer customer base and the Accident Exchange's existing customer base, offering opportunities for cross-selling; • DCML's insurance product is written in conjunction with Norwich Union and we anticipate being able to offer that insurer the potential for increased revenues as DCML's business expands; and • The board expects the acquisition to be earnings enhancing in the first year of ownership. In the year ended 30 June 2005 DCML's turnover was £2.3 million, profit before taxation was £715,000 and net assets were£711,000. DCML operates from long leasehold premises in Stockport, Cheshire and employs 27 people. The total consideration for the acquisition is made up of initial consideration of £8 million and deferred considerationof up to £4 million. The initial consideration will be satisfied as to £5 million in cash (which Accident Exchange has raised by entering into a 6 year term loan) and £3 million by the issue of 721,587 new Accident Exchange ordinary sharesdirect to the vendors of DCML at a price of 415.75p per share (being the average of the mid market price for the five previous days prior to the making of this announcement). The deferred consideration is payable dependent on DCML attaining certain financial targets for the period from 1 May 2006 to 31 December 2006 and is payable in shares or loan notes at the option of Accident Exchange. The shareholders of DCML have entered into a nine month lock in on the initialconsideration shares (to be waived at any time at Accident Exchange's discretion and in any event should the share priceexceed £5) and to orderly market undertakings for a further 6 months in respect of both the initial and deferred consideration shares should the deferred consideration be satisfied by shares. Dennis Ryan, the founder and managing director of DCML will remain with the business until 31 December 2006 to facilitate both the attainment of the financial targets and a smooth handover of the management of business. The acquisition is conditional on the admission of the new ordinary shares to trading on the Alternative Investment Market;this is expected to occur on Friday 5 May 2006 and therefore the acquisition will be reported as a post balance sheet event in the financialstatements for the year ended 30 April 2006. Property acquisition and immediate sale and leaseback of new premises The Company has contracted to occupy a new build industrial warehouse distribution centre in Coleshill, West Midlands. This will serve as the new administrative headquarters and principal fleet distribution centre, providing room for anticipated growth. The building, known as Alpha 1, comprises approximately 218,000 square feet of office and warehouse accommodation. The premises will be occupied on commercial terms contained with a 15 year lease. Effected via a back-to-back transaction, the freehold has been acquired and sold on to a property investment corporationwith effect from 28 April 2006, yielding an exceptional profit before tax of approximately £2.6 million after associatedexpenses. This profit will be reported within the results for the year ended 30 April 2006. Announcement of preliminary results Results for the financial year to 30 April 2006 are expected to be released in the week commencing 12 June 2006. ENDS Enquiries Jonathon Brill / Billy Clegg, Financial Dynamics, Tel: 020 7831 3113 This information is provided by RNS The company news service from the London Stock Exchange