16 Mar 2009 07:00
| FOR IMMEDIATE RELEASE | 16 March 2009 |
Accident Exchange Group Plc
("Accident Exchange" or the "Group")
INTERIM MANAGEMENT STATEMENT
The Board of Directors ("Board") of Accident Exchange is today releasing its Interim Management Statement for the trading period from 1 November 2008 to 28 February 2009.
Given the proximity to the year end, Accident Exchange does not plan to issue any further trading update until the Group's audited results for the year ending 30 April 2009 are released in mid-July 2009.
Update on Cost Reduction Initiatives
The Group announced a significant programme of cost reduction initiatives in its Interim Report released on 11 December 2008. Good progress has been made on all of those initiatives and, as a priority, the Board continues to recognise the need to balance the size of the business with the Group's expected share of the market opportunity.
As previously referenced in the Interim Report, by re-negotiating commission terms with key dealers, future fleet purchases of over £40.0 million have now been avoided in exchange for additional commission payments now being charged in H2 FY2009 of approximately £4.2 million. This one-off incremental commission charge will be reflected in the results for the year ending 30 April 2009 and in short term cash flow; however, the rapid payback thereafter will be evident in an improvement to gearing, reduced cycling of the fleet and a further reduction in fleet size through FY2010.
We have also implemented a change to the delivery mechanism for the Group's Accident Management Solution. This will facilitate annualised net cost savings of around £4.0 million, having already repatriated and scheduled the disposal of around 530 vehicles previously used as courtesy vehicles within our repairer network.
We announced in December our intention to continue to review overhead levels after having already commenced a headcount reduction programme in November 2008. To date, headcount has reduced by 56 delivering an annualised saving of around £1.75 million, effective from April 2009. In addition, in January 2009 we consulted with our staff and agreed a package of cost reduction measures with them including a headcount freeze, salary reductions to all, including the Board, and revisions to benefits, bonuses, working practices and pension contributions. When fully implemented from April 2009 these additional measures will generate annualised savings in excess of £3.0 million.
Trading Update
The effects of the current economic downturn have been reported previously by us and by others in the credit hire and automotive sector generally. The decrease in driven miles and accident volumes continues to be the dominant influence on trading.
Rental starts for the four months ended 28 February 2009 were 3% down on the comparative period at 12,800 of which 52% were prestige (comparative period: 13,200, of which 54% were prestige). As referred to in our Interim Report, in common with the industry, rental lengths continue to be reduced by improved efficiency in the speed of vehicle repairs arising from greater available capacity within the repair industry, which itself has arisen from reduced accident volumes. Consequently, rental days for the four months ended 28 February 2009 were 7% down on the comparative period at 367,000, 50% of which were prestige (comparative period: 397,000; 58% were prestige).
Referral volumes from a significant new insurance based account win in March 2009 are expected to counter any reduction in seasonal volumes that would ordinarily arise at this time of year as the winter months come to an end. The account is already generating claims at a run rate in excess of 1,000 per month. This account win will further increase the proportion of mainstream rental days.
As a consequence of the reduction in fleet purchase commitments fleet ownership costs have reduced, with the total fleet size of 5,135 at 28 February 2009 being 1,000 units smaller (16%) than a year ago and 857 units smaller (14%) than that reported at 31 October 2008.
The used vehicle market has been buoyant since December and the Group has disposed of vehicles in volumes which were in line with expectations and at prices which were also consistent with expectations.
Cash continues to be managed tightly through the reduction in capital investment referred to above and also through the drive to minimise costs and maximise cash flow. Total cash collected in the four month period to 28 February 2009 rose by 12% to £49.6 million (comparative period: £44.3 million). The Group has improved its ability to pursue claims through litigation, such that 20% of the cash collected in the period arose on claims that had been sent to collecting solicitors (comparative period: 14%).
The Board believes that if recent cash collection levels are maintained, as the benefits of the cost reductions already implemented flow through fully the Group will have attained its stated and ongoing primary objective of trading at cash flow breakeven as it enters its new financial year in May.
Estimation of settlement of trade receivables
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.
In common with other businesses operating in our sector, we have seen settlement adjustment levels rise over recent months. Whilst cash collection levels have increased to expected breakeven levels as referred to above, settlement adjustments on claims closed more recently are now exceeding previously anticipated levels. We are considering the potential impact of this on the carrying value of trade receivables as at 30 April 2009 which may result in the requirement to make an exceptional charge in the results for the year ending 30 April 2009.
ENDS
CONTACTS:
| Accident Exchange Group Plc | |
| Steve Evans, Chief Executive | 08703-009 781 |
| Martin Andrews, Group Finance Director | 08703-009 781 |
| Teathers | 020-7426-9000 |
| Shaun Dobson | |
| Bankside | |
| Steve Liebmann or Simon Bloomfield | 020-7367-8888 |
Forward Looking Statements
This IMS 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.
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.