ACE.L Regulatory News (ACE)

14 Jun 2006 07:01

Accident Exchange Group PLC14 June 2006 FOR IMMEDIATE RELEASE 14 June 2006 Accident Exchange Group Plc RESULTS FOR THE YEAR ENDED 30 APRIL 2006 Accident Exchange Group Plc ("Accident Exchange", "the Company" or "the Group") has announced its audited results for the year ended 30 April 2006. Theseresults are reported under UKGAAP. Key points: • Results reflect another year of strong organic growth in turnover, profits and earnings per share. • The financial results for the year were: o Turnover up 147% to £53.5m (2005: £21.7m); o Adjusted profit before tax* up 120% to £16.3m (2005: £7.4m); o Additional one-off profit from purchase, sale and leaseback of new HQ and distribution centre: £2.6m; o Profit before tax up 167% to £17.9m (2005: £6.7m); and o Adjusted earnings per share* up 111% to 17.5p (2005: 8.3p). * stated before goodwill amortisation, share option charges and profit on disposal of property • Proposed final dividend up 100% to 2.0p (2005: 1.0p), making 3.0p for the year (2005: 1.5p). • Strong growth in key business metrics: o Car fleet up from 961 to 2,767 as at 30 April 2006; o Fleet utilisation across market segments ranged from 73% to 89% for the year; o Referring dealer partners up to 566 as at 30 April 2006 (2005: 293); o Number of rental days up 151% to 404,000 (2005: 161,000); and o Staff numbers up from 133 to 363 as at 30 April 2006 and 427 today. • Manufacturer sponsored relationship formed with Audi UK - a first for Accident Exchange. • Significant new referral relationship announced today with European Motor Holdings plc. • Acquisition of DCML Limited ("DCML") for up to £12m, completed shortly after the year end. Lord Young of Graffham, Non-Executive Chairman, stated: "I am delighted to report yet another year of significant growth in turnover,profit and earnings per share. We have an excellent pipeline of potential newreferral agreements with leading motor dealerships and car manufacturers andexpect to strengthen our relationships with insurance companies. The Board isconfident of achieving a further year of strong performance." CONTACTS: Accident Exchange Group PlcSteve Evans, Chief Executive today: 020-7367-8888; thereafter: 08700-116 719 Martin Andrews, Group Finance Director today: 020-7367-8888; thereafter: 08700-053 649 BanksideSteve Liebmann or Simon Bloomfield 020-7367-8888 About Accident ExchangeBased in Coleshill, West Midlands, Accident Exchange delivers accident management and other solutions to automotive and insurance related sectors. Quoted on AIM, the stock code is LSE: ACE. CHAIRMAN'S STATEMENT I am delighted to report yet another year of significant growth in turnover,profit and earnings per share. These excellent results reflect AccidentExchange's strong and growing referral base coupled with a total commitment toproviding excellent customer service. Results, finance and dividend Turnover for the year to 30 April 2006 increased 147% to £53.5 million (2005:£21.7 million). The operating margin for the year (before amortisation ofgoodwill and provision for share option charges) was 34.0% (2005: 38.7%)reflecting an increased proportion of lower margin 'mainstream' credit hire andcredit repair revenue when compared to last year. In addition, fleet utilisationreduced during the second half of the year as additional capacity was added toprovide for expected future volumes and as we expanded our operational platformin our three distribution centres. We have addressed this issue and currentfleet utilisation levels are improved across the majority of our fleet segments. Profit before tax, including the £2.6 million (2005: nil) profit on thetransaction relating to the sale and leaseback of our new HQ premises, was 167%higher at £17.9 million (2005: £6.7 million). Adjusted earnings per share(before goodwill amortisation, share option charges and the profit on theproperty disposal) increased 111% to 17.5p (2005: 8.3p) and basic earnings pershare increased 161% to 18.8p (2005: 7.2p). During the year, the rapid growth of the business required investment in bothworking capital and in the vehicle fleet. £7.7 million, net of expenses, wasraised early in the financial year through a placing of new shares and, afterthe cash flows for the year, period end bank borrowing was £6.5 million (2005:£17,000). Total net debt at 30 April 2006 was £60.7 million (2005: £17.3million) after the inception of £59.4 million (2005: £18.2 million) in hirepurchase debt in relation to fleet expansion with the year end rental fleettotalling 2,217 vehicles, up from 870. £8.8 million was received during the yearon fleet disposals with the sale prices achieved being in line with ouraccounting net book values. A doubled final dividend of 2.0p per share (2005: 1.0p) is being recommended,making a total of 3.0p for the year (2005: 1.5p). Strategy and business development It is always pleasing to report such a healthy set of results but I am equallyencouraged by the progress that has been made in developing and maturing theinfrastructure of the Group over the two years since it was admitted to theAlternative Investment Market. Our progress has been both internal, thestrengthening of your Board, the recruitment of key operational managers and thedevelopment of our existing people, as well as external, with the maturing andexpanding relationships we have developed with our suppliers and partners. Accident Exchange operates a core business model which revolves around winningand then developing relationships with prestige franchise dealers, dealer groupsand manufacturers. In turn, these referral sources introduce us to theircustomers who need a replacement vehicle because their own has been damaged inan accident for which someone else was to blame. We provide a high percentage ofthese referred customers with a hire car whilst their own car is not usable.Subsequently, the charges incurred are recovered from the insurer of the atfault party. The growth in our referral base and the increasing number ofdealers, dealer groups and manufacturers we work with supports our increasingpenetration in this area. The announcement last week of an exclusiverelationship with Audi UK is a further example of how we have consolidated ourposition during the year and demonstrates our intention to continue to extendour proposition upstream. We have also extended our range of products during the year. A key part of thisextension is that we now offer accident management services to the customers offranchised dealers. We do this by building a dealer branded marketing campaignand then, on their behalf, enrol their customers into a programme which allowsthem to call a 24 by 7 call centre if they are unfortunate enough to be involvedin an accident. This service has allowed us to increase the level of referralswe enjoy from participating dealers and has also strengthened the relationshipswe have with our dealers. Over the past six months we have also extended our distribution channels toinclude the business user customers of contract hire and leasing companies. Aswell as extending our potential market, a by product of this initiative is thatwe have broadened the composition of the fleet to reflect the mix of vehiclesleased by contract hire operators. This means that we now offer mainstream andlight commercial vehicles to our customers as well as prestige cars and weexpect this trend to continue. We also remain focused on the use of technology as the cornerstone of ourstrategic vision. Since its inception the Group has demonstrated that technologyis a major contributor to our operational efficiency and financial success. Itis not lost on us, however, that in 2005 (the last year for which statistics areavailable) the insurance industry incurred costs of some £370 million managingand resolving motor claims. In the medium term, we remain focused on theopportunity to use technology to deliver cost savings and efficiency gains tothe UK Insurance Industry in the motor claims supply chain. The recentacquisition of DCML is the first step towards delivering against that strategyand this acquisition is discussed in more detail in the Chief Executive'sStatement. Proposed application to join The Official List It has been clear to your Board that the next phase of our corporate evolutionwould involve a move to the Official List of the London Stock Exchange. I expectyour Board will make a formal announcement about such a move in due course. Outlook Accident Exchange has developed a strong momentum which is expected to besustained in the coming year. We have an excellent pipeline of potential newreferral agreements with leading motor dealerships and leasing and contract hirecompanies. We also expect to strengthen our relationships with car manufacturersand with insurance companies over the coming year. The Board is confident ofachieving a further year of strong performance. Non-Executive Chairman I have decided that this is an appropriate time for me to retire both asNon-Executive Chairman and as a director of the Group at the conclusion of theforthcoming Annual General Meeting on 20 July. I am delighted to announce that,with the support of the entire Board, David Galloway will then assume the roleof Non-Executive Chairman, having joined the Board nearly a year ago as DeputyChairman. It has been a pleasure working with David over the last year. He hasalready made a considerable contribution to the performance and dynamic of yourBoard and it will be his privilege to lead the Group through its next phase ofgrowth. I first became the Chairman of a listed company in the late sixties and in theensuing decades I have been privileged to chair many companies, large and small,listed and private. Never before have I encountered any company that grew withthe rapidity and the sure fire certainty that your company has under theinspiration and guidance of Steve Evans in the less than five years since it wasfounded. I shall leave behind me a group with the management, staff and businessconcept able to propel it into the very first rank of businesses in the country.I shall continue to cheer from the sidelines as a shareholder. The Rt. Hon. Lord Young of GraffhamNon-Executive Chairman14 June 2006 CHIEF EXECUTIVE'S STATEMENT Focus on delivering growth As the Chairman has reported, we have delivered another year of superb growth inrevenue and profit. It is no accident that Accident Exchange has performed sowell in the last year. We have remained focused on executing against our corestrategy whilst working hard at building incremental distribution opportunitieswhich will form part of our future growth platform. As at 30 April 2006 we had 566 referring motor dealers. I am pleased to announcetoday that we have entered into an agreement with European Motor Holdings plcwhich extends to all of their 47 dealerships and which represents franchises forAudi, Bentley, BMW, Jaguar, Land Rover, Mini, Volvo and Volkswagen. With thisrelationship and with the new potential from the relationship with Audi UK thatwe announced last week, we start this year with a very strong dealer referralbase. Whilst we continue to negotiate other potential dealer contract wins, ourreferral base is also augmented by the new relationships we enjoy with theseveral contract hire and leasing companies referred to later in this report. Growing pains Some of the challenges we faced during the year were considerable. For example,our rapid rate of expansion coupled with an absolute shortage of suitable headoffice space locally forced us to split three functional parts of our operationinto nine separate locations, all within a mile of each other. In anorganisation that prides itself on speed and quality of service and the intimacyof our customer relations, the property situation made parts of the businessprocess more difficult to manage and, for short periods, stretched some of ourIT infrastructure. I believe that the acquisition of our new head office anddistribution centre at the end of April 2006 will enable us to win back some ofthe operational efficiencies lost during the year. As always, growth was a key part of our strategy over the last twelve months andwill continue to be the defining theme of our plans for the coming year. Whilstrapid growth is exciting, I have to accept that we experienced some growingpains during the year. Aside from the property headache that we faced, we alsosaw significant growth in our head count, needed to mature our systems, trainingand business processes and to extend our distribution network from two to threelocations. At the same time we had extended our customer referral sources toinclude contract hire and leasing companies; this meant we had to extend ourrange of vehicles in the fleet and then balance that fleet across our threedistribution centres. On the positive side, growth has also necessitated that we focus on the searchfor commercial efficiencies and economies of scale. I am pleased to report,therefore, that we have also made significant progress in reducing a variety ofour key costs - including those associated with recruitment, financing andinsurance - all of which will contribute to our continued focus on improvingmargin. As ever, our team of people responded magnificently to the challenges wefaced and I thank them for their effort and hard work. Developing the organisation We have always recruited and trained people and built capacity ahead of therevenue growth curve. Our staff headcount at 30 April 2006 was 363 (up from 133a year earlier) and my operational leadership team now consists of 15executives. Our total headcount already exceeds 400 as of today, reflecting thedelivery resource requirements of our head office and satellite distributioncentres, our continuing expansion of the sales and support team and theacquisition of DCML. Our capacity to recruit and develop people against a functional and culturalprofile and then to train and integrate them into the business is fundamental toour continued success. During the year we drew together a recruitment,induction, learning and development team who recruited and trained over 200people during the period, as well as enabling us to build personal developmentplans for our existing employees. As the business has continued to grow we have focused on recruiting anddeveloping capable line managers. This process is almost continual 'work inprogress' as people mature into new roles. Given the increase in the size of theGroup's operations and our continuing growth aspirations, we have decided tocommence a search for a suitable candidate to fill a new role of Chief OperatingOfficer to help strengthen further the senior management team. The move into our new HQ building, known internally as 'Alpha 1', will benefitthe enlarged team. Alpha 1 became operational for our fleet and logistics teamin early June and will be fully fitted and operational for all other functionsby mid September 2006. Alpha 1 is a simple industrial warehouse building whichcomprises approximately 220,000 square feet of warehouse space. It will befitted internally with an incremental 70,000 square feet of office accommodationoccupying three floors so that we will retain nearly 200,000 square feet ofavailable warehouse space. This has been zoned into 30 vehicle preparation bays,a vehicle reception area for the receipt and preparation of new vehicledeliveries before they join the fleet, a "SMART" repair area for vehicles whichsuffer minor damage whilst on hire, a vehicle disposal area for the preparationof vehicles to be sold or returned at the end of their life and an area forvehicle storage and parking. Operational performance During the year, our fleet changed in both its size and composition. At the endof the period our total fleet size was 2,767 vehicles of which 2,217 wererevenue generating for our credit hire business for no-fault accidents. 291vehicles were used as courtesy vehicles for supporting members of our AccidentManagement scheme who had been involved in accidents for which they were atfault and the balance comprised staff vehicles and vehicles in the process ofdisposal. The ABI General Terms of Agreement (GTA) provides the framework around which wesubmit credit hire claims to the insurance industry for payment. In April 2006revised GTA rates were agreed with insurers for the period to July 2007. Inprior years the outcome of the GTA rate review was easy to implement internallybecause we had a narrower range of vehicles and fewer applicable tariffs thanexist today. Because of our broader customer referral base our total year endfleet comprised 2,339 prestige vehicles and 428 mainstream vehicles, the latterincluding light commercial vehicles and a small number of motorbikes. This changing mix of vehicles within our fleet is now "rated" across the revisedstandard set of vehicle groupings that arose from the last rate review. In orderto remain compliant with the GTA, as well as accepting the new rates from 1April 2006 we have adopted the new GTA defined vehicle groupings and have at thesame time also simplified the documentation that we now submit to insurers forpayment. Our motor vehicle groups are now segmented into mainstream, 4x4, people carrier,prestige saloon, prestige sports, luxury, vans and commercial vehicle categoriesand our fleet is now spread across our three operational depots in Glasgow,Warrington and Coleshill. We eased our utilisation target during the year as webalanced the mix of the enlarged fleet with demand across those three locations;utilisation rates over the period and across these categories ranged from 73% to89% with the majority of our groups having utilisation levels well within ourrevised target range of 75% to 85%. As a result principally of the change inrental day mix and fleet utilisation, gross margin of 53.7% was reported for2006 (2005: 59.1%). Rental days for the year rose 151% from 161,000 rentable days to 404,000. Theproportion of rentable days represented by mainstream and commercial vehicles(which have lower revenue per day) grew from 14% in 2005 to 22% in 2006. Thischange in rental mix was a result of a planned increase in the volume ofbusiness generated by contract hire and leasing companies and the mainstreamdealerships of those dealer groups with whom we are now contracted. Business development We remain focused on our core market. Many of our dealer relationships arecontracted and I am pleased to report that many of the new agreements we enter,and most of the renewals we have secured, are now for periods of two years. Thisreflects customer appreciation of the service levels we provide. As well as thenew agreement with European Motor Holdings plc referred to earlier, in the lastmonth we have also extended our agreement with Inchcape Motors Retail Ltd inrespect of their Lexus, Toyota and BMW dealerships. We have also extended thelength of our current relationships with a number of our dealers throughout theyear and 71% of our relationships are now contracted. We now provide an Accident Management service on behalf of 325 of our dealershippartners. Accident Management is an increasing part of our service offering andit delivers protection to the dealers' clients 24 hours a day, 365 days a year.The service requires us to manage a range of motoring incidents and accidents onbehalf of the dealer but it generates a volume of referral business which I amsure would be lost elsewhere if it were not for the service we provide. We also have strong relationships with a number of vehicle manufacturers whorecognise the quality and values that we encapsulate in our customer facingservices. Our relationship with BMW continues to become stronger. BetweenOctober 2005 and April 2006 we doubled the volume of hire days as a result ofreferrals generated from BMW dealers. Naturally, I am delighted that we have nowsecured an exclusive agreement with Audi UK to provide credit hire and accidentmanagement services throughout their entire dealer network because we havesimilar growth aspirations in the coming year for business generated from Audidealers. We now provide accident management or credit hire services to a growing numberof contract hire and leasing companies. These include Brammall & Jones ContractHire Limited, Inchcape Fleet Solutions Limited, Marshalls Leasing, ToomeyEurolease Limited, all of whom were announced recently as being new referrersfor the Group. Our pipeline of business in this sector is strong and we continueto negotiate contracts with a number of other partners and expect to announcedetails of further account wins in the coming months. I am confident that we will continue to develop our relationships in all areas. Acquisition of DCML Just after the end of the financial year we acquired DCML for a maximumconsideration of £12 million. DCML provides a software platform which allowsmotor retailers to operate and control a fleet of their own courtesy cars usinga web based application available to their vehicle servicing advisors. Thesoftware enables the dealer to charge a small fee for the use of those carswhich includes the provision of insurance to their customer whilst the courtesycar is in use. The operational benefits to dealers who use DCML are clear andthe system also allows them to generate a revenue stream from the operation ofthat fleet. DCML has over 1,000 contracted franchised dealers using their product at morethan 1,200 geographic locations in the UK. The synergies between AccidentExchange and DCML give us the opportunity to market two differing services tothose non-overlapping dealers and to create a more focused approach in servicingall 1,000 dealers. DCML also has significant manufacturer relationships including Chrysler Jeep,Jaguar and BMW, enabling these manufacturers to manage and insure courtesyvehicles and to run demonstration and test programmes through their dealernetwork. I am pleased to be able to announce that just a month after we acquiredDCML, it has been informed that it has been successful in winning a tenderprocess to provide a web based software application and insurance facility toenable a leading prestige vehicle manufacturer to operate a rental and courtesycar programme for all of their UK dealers. This is a tremendous win for thebusiness and bodes well for the future. We will announce further details of thisdevelopment in the near future. In the forthcoming year, together with DCML, we plan to develop and market aseries of innovative insurer based propositions which we believe will findsupport from our target market. Market developments Since the introduction of the ABI GTA there has been a gradual but clearimprovement in the relationship between insurers and credit hire operators. Ourstrategy has always been supported by using technology and efficient businessprocess to help reduce cost from the motor claims supply chain. It is my beliefthat we are approaching a 'tipping point'. There is an increasing need on thepart of insurers to explore and embrace a cost efficient 'process centric'approach to supplying a mobility solution to their policy holders in a costcontained environment. For some time we have been exploring the most efficientway of reacting to this opportunity and we expect to announce initiatives inthis area shortly. Moving forward In our determination to sustain our rate of growth, I am supported by acommitted and industrious team. During the period a further review of the salesand development process within the business was undertaken. The results fromthis review, together with actions implemented over the past 18 months, haveenabled us to grow revenue by over £30 million in the period. Our aspirationsremain high and our competitive advantage is based heavily on the skills andapproach of our people and the value they deliver to the business by workingeffectively and innovatively in partnership with our referral customers. To thatend we have now implemented a refined approach to how we win, retain, developand renew our account relationships, based on the quality and strength of ourservices and the effectiveness of our people in identifying incremental revenueopportunities. We will continue to pay the greatest attention to detail in our business andwill continue to develop our core product offering and to differentiate it fromthat of our competitors. We will remain focused on market changes and willcontinue to evaluate and enter related markets where we believe we can create aninnovative proposition based on our core competencies. In the coming yearrevenue growth and focus on margin will be priorities and I remain confident ofthe long term prospects for the business. I would like to thank everyone within Accident Exchange for their hard work indelivering such outstanding results over the past year. We have a strong teamspirit and I am confident that our commitment to excellence of service willenable us to continue to forge ahead. Finally, I would like to express mypersonal thanks to Lord Young for his support, encouragement and advice over thepast five years. Steve EvansChief Executive14 June 2006 FINANCE DIRECTOR'S REPORT Introduction It is a privilege to be writing my second report as Finance Director on theGroup's second full year of trading since joining AIM in April 2004. Theseresults make it clear that our business model is capable of generatingsignificant growth and profit as we execute against our strategy of deliveringaccident management and other solutions to the automotive and insurance relatedsectors. Financial Results Overview Revenue in the year ended 30 April 2006 of £53.5 million (2005: £21.7 million)reflects growth of 147% from 2005. Headcount grew by 230 people from 133 to 363as at 30 April 2006 and the revenue generating fleet grew from 870 vehicles(which reflected 91% of the total fleet of 961 vehicles) to 2,217 vehicles bythe end of the year (now reflecting 80% of the total fleet of 2,767 vehicles). Gross margin reflected the changes in fleet mix and the utilisation ratesattained in the period, as detailed in the Chief Executive's Statement.Operating profit of £17.2 million rose 123% from £7.7 million last year and wasaugmented by the £2.6 million profit reported on the purchase and subsequentsale and leaseback of our new headquarters building, Alpha 1, giving rise toprofit before taxation of £17.9 million from £6.7 million last year. We were delighted at being able to effect the purchase and coterminous sale andleaseback of Alpha 1 within what was a very short time frame and to do so atsuch a material profit. The lease terms that we have going forward are extremelycompetitive at less than £5.50 per square foot. Profit before taxation is stated after share option charges of £290,000 (2005:£10,000) and goodwill amortisation of £656,000 (2005: £656,000). Adjusted profitbefore taxation, goodwill, share option charges and the profit on the disposalof Alpha 1 ("Adjusted PBT") was £16.2 million (2005: £7.4 million) a rise of120%. Earnings per share Earnings per share rose 161% to 18.8p (2005: 7.2p) and earnings per share beforegoodwill, share option charges and the profit on the disposal of Alpha 1("Adjusted EPS") rose 111% to 17.5p (2005: 8.3p). Balance Sheet and Financing During the year we raised net proceeds of £7.7 million (after expenses of £0.3million) via a placing of 3,478,261 new ordinary shares at £2.30 per share.These funds were raised to finance working capital requirements and tostrengthen the balance sheet. We ended the year with a bank overdraft of £6.5 million (2005: overdraft of£17,000) being just 16.5% of trade debtors, the primary asset on which bankfacilities are secured. Total net debt at 30 April 2006 was £60.7 million (2005:£17.3 million) reflecting the hire purchase arrangements used to finance thepurchase of vehicles and which totalled £54.2 million at the year end (2005:£17.3 million). 2,303 cars were added to the financed fleet at a cost of £51.0million in the year. £8.8 million was received on the disposal of 550 vehiclesin the year and these proceeds were used to repay the associated hire purchasedebt attached to the vehicle. Together with the normal monthly capital repaymentfor each vehicle, a total of £22.5 million of hire purchase debt was repaid inthe period (2005: £5.2 million). The sales proceeds received on the vehicledisposals matched the accounting net book value of those vehicles and hence weattained our targeted break even position with a nominal £1,000 profit ondisposal of vehicles reported for the entire period. Year end gearing, reflecting the hire purchase debt, was therefore 163% (2005:93%). As part of the arrangements of the sale of Alpha 1, £3.1 million of theconsideration receivable by us was held in an escrow account on our behalf as at30 April 2006 and was received in cash in May. Consequently the gearing ratios,net debt and cash balances reported in these financial statements are statedbefore the receipt of this £3.1 million which is included in debtors as at 30April 2006. Net cash inflow from operating activities of £6.7 million was generated (2005:£5.6 million) after the consumption of £19.0 million of working capitalcommensurate with our revenue growth and business model. £3.2 million of thisworking capital consumption was as a result of an increased focus on creditrepair business in the year, whereby we finance the repair costs of the vehicleinvolved in the accident (and pay the body shop promptly for effecting therepair) ahead of receipt of the claim proceeds from the insurer. Dividends A year end dividend of 2.0p per share (2005: 1.0p) has been proposed todaymaking a total of 3.0p for the year (2005: 1.5p). Dividends approved after thebalance sheet date are no longer deducted from shareholders' funds as at thebalance sheet date, and therefore the dividend shown on the face of the P&Laccount reflects the dividends paid in the year. The final dividend is subjectto approval at the AGM of the company on 20 July 2006. Acquisition of DCML The activities of DCML, and the rationale for its acquisition, are summarised inthe Chief Executive's Report. 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 £8.0 million and deferred consideration of up to £4.0 million. The initial consideration has been satisfied as to £5.0 million in cash (which we have raised by entering into a 6 year term loan) and £3.0 million by the issue of 721,587 new ordinary shares direct 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 our option. The shareholders of DCML have entered into a nine month lock in on the initial consideration shares (to be waived at any time at our discretion andin any event should the share price exceed £5) and to orderly market undertakings for a further six months in respect of both the initial and deferred consideration shares should the deferred consideration be satisfied by shares. The acquisition was conditional on the admission of the new ordinary shares to trading on the Alternative Investment Market and this took place on Friday 5 May2006. Consequently the acquisition is reported as a post balance sheet event inthese financial statements. Share Capital As at 30 April 2006 we had 65,226,480 ordinary shares of 5p in issue. Followingthe issue of the 721,587 acquisition shares referred to above we currently have 65,948,067 ordinary shares in issue. We also have in issue 12,514,000 Deferred Shares which arose as a result of a share reorganisation at the time of the acquisition of Accident Exchange Limitedin April 2004. These shares are not quoted on AIM, do not carry any rights to attend or vote at a general meeting of the company nor do they carry any right to receive a dividend. As noted in the AIM admission document issued in April 2004 to, inter alia, approve the acquisition of Accident Exchange Limited the Deferred Shares are effectively worthless. In order to simplify the share structure of the company it is the intention of the company to purchase the Deferred Shares for an aggregate consideration of £1, as provided for in the articles of association of the company, such that the company will have only Ordinary shares in issue. This requires the approval of shareholders and hence an appropriate resolution will be included for consideration at the AGM on 20 July 2006. Implementation of International Financial Reporting Standards ("IFRS") As an AIM listed company we do not have to adopt IFRS until our year ending 30 April 2008. However we have progressed a project to consider the ramifications of IFRS and can announce that we will be adopting IFRS in our financial statements for the year ending 30 April 2007. Summary 2006 has been a further year of continued significant growth. We have absorbed the normal growing pains one would expect in a business that has grown so rapidly and we remain confident that our business model will allow further penetration of our chosen markets. Martin Andrews Group Finance Director 14 June 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 April 2006 Year ended Year ended 30 April 30 April 2006 2005 (* Restated) Note £'000 £'000 Turnover - Continuing operations 53,460 21,680Cost of sales (24,726) (8,865)Gross profit 28,734 12,815 Administrative expenses:Administrative expenses before amortisation (10,860) (4,438)of goodwillAmortisation of goodwill (656) (656)Total administrative expenses (11,516) (5,094)Operating profit 17,218 7,721Profit on disposal of fixed asset 2,600 -Net interest payable (1,912) (1,016)Profit on ordinary activities before 17,906 6,705taxationTaxation 3 (5,783) (2,241)Profit on ordinary activities after taxation 12,123 4,464Equity dividends 4 (1,305) (309)Profit on ordinary activities for the 10,818 4,155financial periodBasic and diluted earnings per share 2 18.8p 7.2p There is no difference between the reported profit on ordinary activities beforetax and the historical cost profit on ordinary activities before tax.There are no gains or losses other than the profits for the periods above andtherefore no separate statement of total recognised gains and losses has beenpresented.* See note 1 - Basis of preparation CONSOLIDATED BALANCE SHEET As at 30 April 2006 30 April 30 April 2006 2005 (* Restated) Note £'000 £'000Fixed assetsIntangible assets 11,865 12,562Tangible assets 5 52,306 16,413 64,171 28,975 Current assetsDebtors 6 44,990 12,272 Creditors:Amounts falling due within one year 7 (31,554) (9,119)Net current assets 13,436 3,153 Total assets less current liabilities 77,607 32,128 Creditors:Amounts falling due after more than one year 8 (36,668) (12,009) Provisions for liabilities and charges 9 (2,925) (936) 38,014 19,183 Capital and reservesCalled up share capital 3,887 3,713Share premium 7,959 410Other reserves 10,846 10,846Profit and loss account 15,322 4,214Equity shareholders' funds 10 38,014 19,183 * See note 1 - Basis of preparation CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 April 2006 Year ended Year ended 30 April 30 April 2006 2005 Note £'000 £'000Net cash inflow from operating activities 11 6,729 5,552 Returns on investments and servicing offinanceInterest received 119 2Interest on bank loans and overdrafts (47) (39)Interest element of finance lease payments (1,984) (979)Net cash outflow from returns on investments (1,912) (1,016)and servicing of finance Taxation (3,385) (81) Capital expenditure and financial investmentPurchase of tangible fixed assets (1,274) (314)Proceeds of disposal of property 688 -Proceeds of disposal of fixed assets 8,761 987Net cash inflow from capital expenditure and 8,175 673financial investment Equity dividends paid (1,305) (309) Net cash inflow before financing 8,302 4,819 FinancingIssue of ordinary share capital 8,000 -Share issue costs (277) -Capital element of finance lease payments (22,473) (5,158)Net cash outflow from financing (14,750) (5,158) Decrease in cash 13 (6,448) (339) NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 April 2006 1. BASIS OF PREPARATION The preliminary announcement has been prepared under the historical costconvention and in accordance with applicable accounting standards in the UnitedKingdom. The principal accounting policies of the Group are set out in theGroup's 2006 annual report which will be sent to shareholders on or before 21June 2006. The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated balance sheet at 30 April 2006 and the consolidated profit and loss account, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2006 statutory financial statements upon which the auditors opinion, dated 14 June 2006, is unqualified and does not include any statement under Section 237 of the Companies Act 1985. Restatement of prior period comparatives Impact of FRS 20 - Share based payment In these financial statements grants of share options have been reported inaccordance with FRS 20, as opposed to the previous treatment under UITF 17. Thisreflects early adoption of this standard. This has resulted in the calculation of an embedded value for the option grantsas at their date of grant and the resulting fair value charge is spread over thethree year vesting period. The charge reflects, for example, the time value ofmoney (as the options are not paid for until the end of the three year vestingperiod) and also factors such the risk free cost of capital of between 4.2% and4.6% and share price volatility of 35%. Applying FRS 20 and determining the new charge for the whole of the prior yearalso results in a charge of £10,000 the same as under UITF 17 reported lastyear). Hence the profit and loss account for the year ended 30 April 2005(whilst having different accounting policies applied to it) remains unaltered. The effect of FRS 20 on the balance sheet as at 30 April 2005 is to reclassifythe credit previously made to "Other Reserves" as a credit to "Profit & LossAccount Reserves". The current period FRS 20 application results in a charge of £290,000 to theprofit and loss account. Impact of FRS 21 - Events after the balance sheet date FRS 21 has been adopted in these financial statements. Under FRS21 dividendswhich are declared after the relevant balance sheet date cannot be accrued for,as was the case previously. As a result the balance sheet and profit and lossaccount for the comparative period have been restated to reflect this with theprior year end dividend of £617,000 being removed from that year and insteadtreated as a dividend in the current period. Impact of FRS 22 - Earnings per share Application of this standard has no impact on these financial statements. 2. EARNINGS PER SHARE Basic and diluted earnings per share The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the year. Whilst share options were in issue over 840,757 shares as at 30 April 2006 thedilutive effect of these potential ordinary shares is not material andconsequently there is no material difference between basic earnings per shareand diluted earnings per share. Details of the earnings and weighted average number of shares used in thecalculations are set out below: Year ended Year ended 30 April 30 April 2006 2005Profit on ordinary activities after taxation 12,123 4,464(£'000)Weighted average number of shares 64,319,615 61,710,273Basic and diluted earnings per share (pence) 18.8 7.2 Adjusted earnings per shareThe calculation of the adjusted earnings per shareis based on earnings as set out below: Year ended Year ended 30 April 30 April 2006 2005Profit on ordinary activities after taxation 12,123 4,464(£'000)Profit after tax on disposal of property (£'000) (1,803) -Profit on ordinary activities after taxation before 10,320 4,464property disposal (£'000)Goodwill (£'000) 656 656Cost of employee share schemes (£'000) 290 10Adjusted profit on ordinary activities after 11,266 5,130taxation (£'000)Weighted average number of shares 64,319,615 61,710,273Basic and diluted earnings per share (pence) 18.8 7.2Profit on disposal of property (pence) (2.8) -Earnings per share before disposal of property 16.0 7.2(pence)Goodwill (pence) 1.0 1.1Cost of employee share schemes (pence) 0.5 -Adjusted earnings per share (pence) 17.5 8.3 3. TAXATION ON PROFIT ON ORDINARY ACTIVITIES The tax charge represents: Year ended Year ended 30 April 30 April 2006 2005 £'000 £'000UK corporation tax at 30% 3,787 1,636Adjustments in respect of prior period 7 (36)Total current tax 3,794 1,600Deferred taxation provision (Note 9) 1,989 641Taxation on profit on ordinary activities 5,783 2,241 The tax assessed for the year differs from the standard rate of corporation taxin the UK as follows: Profit on ordinary activities before tax 17,906 6,705Profit on ordinary activities multiplied by the 5,372 2,012standard rate of corporation tax in the UK of 30%Effects of:Expenses not deductible for tax purposes 404 260Capital allowances in excess of depreciation (1,989) (627)Prior year adjustment 7 (36)Utilised losses - (9)Current tax charge for the year 3,794 1,600 4. EQUITY DIVIDENDS Year ended Year ended 30 April 30 April 2006 2005 (*Restated) £'000 £'000Ordinary sharesFinal dividend of 1.0p per share declared 10 June 617 -2005Interim dividend 1.0p per share declared 7 December 688 3092005 1,305 309 The Directors are recommending the payment of a final dividend of 2.0p pershare (2005: 1.0p). The payment, amounting to £1,318,961, will be made on 21July 2006 to shareholders on the register on 23 June 2006. 5. TANGIBLE FIXED ASSETS Group Property Computer Fixtures Motor Total £'000 Equipment and Vehicles £'000 £'000 Fittings £'000 £'000CostAt 1 May 2005 - 246 181 17,964 18,391Additions in the year 14,220 793 481 50,979 66,473Disposals in the year (14,220) (1) - (11,977) (26,198)At 30 April 2006 - 1,038 662 56,966 58,666DepreciationAt 1 May 2005 - 6 38 1,934 1,978Charged in the year - 233 111 7,219 7,563Disposals - - - (3,181) (3,181)At 30 April 2006 - 239 149 5,972 6,360Net book amount at 30 - 799 513 50,994 52,306April 2006Net book amount at 30 - 240 143 16,030 16,413April 2005 6. DEBTORS 30 April 30 April 2006 2005 £'000 £'000Trade debtors 39,120 11,810Value Added Tax 757 -Sale of property proceeds 3,084 -Other debtors 863 265Prepayments and accrued income 1,166 197 44,990 12,272 As part of the arrangements of the sale of Alpha 1, £3.1 million of the gross(VAT inclusive) cash consideration was held in an escrow account on our behalfas at 30 April 2006 and was received in May 2006. 7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 30 April 30 April 2006 2005 (* Restated) £'000 £'000Bank loans and overdrafts 6,465 17Trade creditors 2,614 1,124Corporation tax 2,045 1,636Social security and other taxes 1,393 650Other creditors 550 179Amounts due under hire purchase contracts 17,572 5,323Accruals and deferred income 915 190 31,554 9,119 8. CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR 30 April 30 April 2006 2005 £'000 £'000Amounts due under hire purchase contracts 36,668 12,009 Borrowings are repayable as follows: 30 April 30 April 2006 2005 £'000 £'000Within one year:Bank loans and overdrafts 6,465 17Hire purchase 20,521 6,665 After one and within two years:Hire purchase 38,103 12,274 After two and within five years:Hire purchase - 52 Less hire purchase interest on the above (4,384) (1,659) 60,705 17,349 The bank overdraft is secured with a fixed and floating charge over certainassets of the Group. Amounts under hire purchase contracts are secured on the assets to which theyrelate. 9. PROVISION FOR LIABILITIES AND CHARGES Deferred taxation £'000The GroupAt 30 April 2005 936Provided in the year 1,989At 30 April 2006 2,925 10. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year ended Year ended 30 April 30 April 2006 2005 £'000 £'000Retained profit for the year 10,818 3,538Prior year restatement (Note 1) - 617At 30 April 2005 as restated 10,818 4,155Employee share scheme charges 290 10Issue of ordinary share capital (including share 8,000 55premium)Share issue costs (277) -Net increase in shareholders' funds 18,831 4,220Equity shareholders' funds at 30 April 2005 19,183 14,963Equity shareholders' funds at 30 April 2006 38,014 19,183 11. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATINGACTIVITIES Year ended Year ended 30 April 30 April 2006 2005 £'000 £'000Operating profit 17,218 7,721Amortisation of goodwill 656 656Amortisation of intangible assets 41 41Depreciation 7,563 2,412(Profit) / loss on sale of tangible fixed assets (1) 20Cost of employee share schemes 290 10Increase in debtors (21,084) (6,446)Increase in creditors 2,046 1,138Net cash inflow from operating activities 6,729 5,552 12. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Year ended Year ended 30 April 30 April 2006 2005 £'000 £'000Decrease in cash in period (6,448) (339)Capital element of finance leases 22,473 5,158Change in net debt resulting from cash flows 16,025 4,819Inception of finance leases (59,381) (18,224)Increase in net debt in period (43,356) (13,405)Net debt at 30 April 2005 (17,349) (3,944)Net debt at 30 April 2006 (60,705) (17,349) 13. ANALYSIS OF CHANGES IN NET DEBT As at As at 30 April Non-cash 30 April 2005 Cashflows items 2006 £'000 £'000 £'000 £'000Bank overdraft (17) (6,448) - (6,465)Finance leases (17,332) 22,473 (59,381) (54,240)Net debt (17,349) 16,025 (59,381) (60,705) This information is provided by RNS The company news service from the London Stock Exchange