ACE.L Regulatory News (ACE)

13 Dec 2006 07:02

Accident Exchange Group PLC13 December 2006 Accident Exchange Group Plc RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2006 Accident Exchange Group Plc ("Accident Exchange", the "Company" or the "Group") has announced its unaudited results for the six months ended 31 October 2006. These results are reported under IFRS. Key points: • Results reflect further strong organic growth and continued development of the scale of the business. • The financial results for the half year were: o Revenue up 135% to £52.8m (2005: £22.5m); o Adjusted profit before tax* up 50% to £9.0m (2005: £6.0m); o Profit before tax up 34% to £7.9m (2005: £5.9m); and o Adjusted basic earnings per share* up 42% to 9.4p (2005: 6.6p); and o Basic earnings per share up 25% to 8.0p (2005: 6.4p) * stated before amortisation of acquired intangible assets, share based payments and exceptional costs incurred in relation to the move to the Official List • Interim dividend increased 50% to 1.5p (2005: 1.0p). • Share placing in late September raised £12.5m (net of expenses). • Move to the Official List from AIM completed on 1 November 2006. • Appointment of Daksh Gupta as Chief Operating Officer with effect from 2 January 2007. • Growth in key business metrics: o Car fleet up to 3,589 from 2,767 as at 30 April 2006; o Fleet utilisation across market segments ranged from 63% to 86% for the half year; o Referring dealer partners up to 750 from 566 as at 30 April 2006; o Number of rental days up 85% to 290,000 from 157,000 in the comparable period last year; and o Staff numbers up to 452 from 363 as at 30 April 2006. David Galloway, non-executive Chairman, stated: "We have won several new dealership and manufacturer relationships recently and we have invested in infrastructure, personnel and fleet in anticipationof continued growth. Against this background we are confident of further substantial growth in trading levels." 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 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. INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2006 Introduction We are pleased to report another successful six months for your Company. Inaddition to reporting further excellent growth in revenue and profit, we have: • made our first acquisition; • strengthened the management team; • strengthened the balance sheet; • moved to the Official List; • agreed our first pilot rental scheme with an insurer; and • continued to develop the infrastructure required to support the Company's growth going forward including progress in consolidating our Midlands operations within the new Alpha 1 centre. On 5 May 2006 we acquired DCML Limited ("DCML") for initial consideration of £8million, with an additional estimated £3 million of deferred considerationpayable in the second half of the current financial year. On 4 October 2006 theCompany raised £12.5 million (net of expenses) from a share placing at £3.25 pershare and on 1 November 2006 the Company moved from AIM to a listing on the mainmarket of the London Stock Exchange. A copy of the Prospectus issued inconnection with this listing is available for download from the Company's website at www.accidentexchange.com. Financial performance Revenue for the six months ended 31 October 2006 rose 135% to £52.8 million(2005: £22.5 million). This increase reflected a 95% increase in our accidentmanagement and related services revenue which, including a first revenuecontribution from DCML of £1.4 million, rose to £40.1 million (2005: £20.6million) and a material increase in the levels of our lower margin credit repairrevenues which grew to £12.7 million in the period (2005: £1.9 million). Adjusted profit before taxation was £9.0 million (2005: £6.0 million), anincrease of 50% (adjusted profit before taxation is stated before amortisationof acquired intangible assets, share based payments and exceptional costsincurred in relation to the move to the Official List). After the effects ofthese items profit before taxation was £7.9 million (2005: £5.9 million), anincrease of 34%. Operating profit increased 56% to £10.4 million (2005: £6.7 million) including afirst contribution from DCML of £0.5 million. Adjusted operating profit beforeamortisation of acquired intangible assets, share based payments and exceptionalcosts increased 70% to £11.6 million (2005: £6.8 million) reflecting anoperating margin of 21.9% (2005: 30.3%), the reduction being primarily as aresult of the significant increase in our credit repair revenue on which grossmargins are approximately 5%. Adjusted operating profit, excluding the profit directly attributable to creditrepair, increased by 62% to approximately £10.9 million (2005: £6.7 million).This represents an operating margin of 27.2% (2005: 32.7%) reflecting aninfrastructure and cost base that has been developed in expectation of acontinued increase in trading levels in the second half of the year and fleetsize, mix and utilisation changes. Basic earnings per share increased by 25% to 8.0 pence per share (2005: 6.4p).Adjusted basic earnings per share increased by 42% to 9.4 pence per share (2005:6.6p). Fully diluted basic and adjusted earnings per share (taking into accountthe potentially dilutive effect of share options and the deferred considerationpayable in relation to DCML) was 7.8p (2005: 6.4p) and 9.2p (2005: 6.6p)respectively. Net cash inflow from operating activities was £10.1 million (2005: £1.7 million)and, with the £12.5 million net proceeds of the share placing, net debt at 31October 2006 was £73.3 million (2005: £25.9 million) reflecting gearing levelsof 124%, down from 154% at 30 April 2006 (2005: 83%). During the period, the Group purchased a total of 1,701 cars for the fleet at acost of £34.4 million. It also sold 721 cars for proceeds of £11.1 million onwhich there was a loss of £0.6 million (2005: £0.04 million). As a result of the increase in revenue, trade debtors increased to £42.1 million(2005: £17.3 million) resulting in average debtor days outstanding of 141compared to 136 at 31 October 2005 and 119 at 30 April 2006 (these comparativesbeing restated in line with the credit repair revenue accounting policy). Thesedebtors are due principally from major insurance companies. IFRS Our financial statements are now prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") and the comparative figures in thisInterim Report have therefore been restated to reflect the anticipated IFRSaccounting policies that are expected to be applied in the Annual Report andAccounts for the year ending 30 April 2007. There has been no significant impacton previously reported profit before taxation other than the reversal ofgoodwill amortisation. Further details on this, and the restatements made to thecomparative figures, are given in the notes to this Interim Report. Dividend A dividend of 1.5 pence per share (2005: 1.0p) has been declared and will bepaid on 24 January 2007 to shareholders on the register on 19 December 2006.This dividend is covered six times by adjusted earnings per share. Operating review Accident Exchange operates a core business model which revolves around winningand then developing relationships with prestige franchise dealers, dealer groupsand vehicle 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. When appropriate, we provide a hire car to the non-fault victim and charge theinsurance company of the driver who was at fault. These and other credit hireclaims are predominately pursued within the terms of the ABI General Terms ofAgreement (the "GTA"). A more comprehensive review of the business is given inthe Prospectus referred to earlier. As at 30 April 2006 the number of motor dealers referring customers was 566.Following a number of successful new agreements in the period, includingEuropean Motor Holdings and Colliers, the number of potentially referringdealers at 31 October had grown to 750 of which approximately 80% are nowcontracted for terms of between one and two years. Inevitably there are some start up costs on new contracts while dealerships aretrained, systems implemented and relationships developed with our staff. Allthese costs are immediately expensed through the profit and loss account whereasthe benefits take time to be realised as the dealers build up to the expectedrun rate of customer referrals over a number of months. We are thereforeconfident of an increase in referral volumes in the second half of the financialyear as these recently won dealership accounts are taken through our trainingprogrammes. We have also developed our relationships with manufacturers and the AudiAccident Aftercare scheme has led us into discussions with other manufacturerslooking to initiate similar customer focussed service levels In addition to our credit hire business, our accident management services havecontinued to grow. This service is now subscribed to by 685 referring dealers(2005: 195) and offers their customers an accident management service providedby us "24/7", 365 days of the year and which encompasses the recovery and repairof the customers' vehicle, the provision of a like for like vehicle replacementservice for their non fault customers and the 48 hour provision of a nonchargeable replacement vehicle even for their fault customers. This high qualitycustomer service strengthens the brand value of the referring dealership whichbenefits from increased customer loyalty and repeat business, therebystrengthening our relationship with the dealer. As a result of all this activity, chargeable rental days increased by 85% to290,000 (6 months to 31 October 2005: 157,000). To accommodate our increased business levels and to provide for the seasonallystrong second half year, the total fleet (including hire purchase financed fleet(on balance sheet), contract hired fleet (off balance sheet) and non revenueaccident management fleet) has grown from 2,767 at 30 April 2006 to 3,589 at 31October 2006. Of these, the rental fleet on 31 October 2006 comprised 2,688vehicles (30 April 2006: 2,069) of which 80% were "prestige" vehicles (30 April2006: 82.5%) and the remainder "mainstream". Maintaining high levels ofutilisation is a key component of our profitability. Over the period,utilisation rates ranged from 63% to 86% across the seven classifications ofvehicle that we monitor compared to a range of 73% to 89% in the year ended 30April 2006. DCML, our recently acquired subsidiary that provides software to dealers toenable them to manage and insure their own courtesy car fleets, continued todevelop in line with expectations at the time of acquisition. The company hasalso signed a three-year agreement to provide software to all participating BMWdealers and the opportunities for further cross selling are being activelydeveloped. At 31 October 2006 the number of dealers using the DCML system stoodat 1,017. Good progress has been made on developing the Group's infrastructure inexpectation of continued and dynamic growth. Headcount has increased from 363 at30 April 2006 to 452 at 31 October with increases across all departments andparticularly in the front line sales and business development teams and in thecash settlement team where several initiatives have been instigated with a viewof improving the cash collection profile from insurers. Further development hasalso been made to our back office IT systems to ensure that our technology morethan keeps pace with business requirements. We are already seeing the logistical benefits of having consolidated ourMidlands based fleet operation into the new 220,000 sq ft Alpha 1 distributioncentre and we anticipate further benefits to be realised when the relocation ofthe remaining administrative functions takes place in the first quarter of 2007. As always none of the progress we have made would have been possible without thehard work and commitment of each and every one of the Group's employees. We areoperating in a rapidly evolving market and have strengthened our position as ahigh quality service provider to automotive dealers and are now just starting toexplore opportunities to provide equivalent service levels to insurers and theircustomers. Our employees' ability to cope with the consequences of rapid growthhas been amply demonstrated and for this the Board would like to express itsthanks. Board We are delighted to have been able to announce recently the imminent appointmentof Daksh Gupta, aged 36, to your Board as Chief Operating Officer with effectfrom 2 January 2007. Daksh has significant business and retail automotiveexperience and his appointment will strengthen our leadership teamsignificantly. Outlook We have won several new dealership and manufacturer relationships recently andwe have invested in infrastructure, personnel and fleet in anticipation ofcontinued growth as these and existing referrer relationships are brought up toexpected referral volumes from, in some instances, a standing start. Againstthis background we are confident of further substantial growth in tradinglevels. Consolidated Income Statement for the six months ended 31 October 2006 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited & (Audited & Restated*) Restated*) Note £'000 £'000 £'000RevenueExisting operations 51,400 22,467 61,415Acquisitions 1,372 - -Total revenue 4 52,772 22,467 61,415Cost of sales (31,716) (11,520) (32,681)Gross profit 21,056 10,947 28,734Administrative expenses (10,633) (4,264) (8,315) Operating profit analysed between:Existing operations 9,884 6,683 20,419Acquisitions 539 - -Total operating profit 10,423 6,683 20,419 Finance costs (2,534) (872) (2,030)Interest receivable 2 88 118Profit before tax analysed between:Profit before tax before profit on 9,026 6,029 16,197disposal of property, amortisation ofacquired intangible assets, cost of sharebased payments and exceptional costsProfit on disposal of property - - 2,600Amortisation of acquired intangible (228) - -assetsShare based payments (140) (130) (290)Exceptional costs 5 (767) - - Profit before tax 7,891 5,899 18,507Taxation 6 (2,628) (1,806) (5,680)Profit attributable to equity 5,263 4,093 12,827shareholders Basic earnings per share 8 8.0p 6.4p 19.9pDiluted earnings per share 9 7.8p 6.4p 19.8p *Restated - see notes 1 and 2. A final dividend of 2.0 pence per share for the year ended 30 April 2006 (1.0 pence per share for the year ended 30 April 2005) was paid on 21 July 2006. The Directors have approved an interim dividend of 1.5 pence per share in respect of the six months ended 31 October 2006 (1.0 pence per share for the six months ended 31 October 2005). Consolidated Statement of Recognised Income and Expense for the six months ended 31 October 2006 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) £'000 £'000 £'000Deferred tax on share options (16) - 29Net (expense) / income recognised (16) - 29directly in equityProfit for the period 5,263 4,093 12,827Total recognised income for the 5,247 4,093 12,856period *Restated - see notes 1 and 2. Consolidated Balance Sheet at 31 October 2006 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) Note £'000 £'000 £'000AssetsNon-current assetsGoodwill 21,663 13,053 13,053Intangible assets 3,470 144 124Property, plant and equipment 68,144 28,070 49,448 93,277 41,267 62,625 Current assetsClaims in progress 12,028 4,239 12,402Trade and other receivables 10 45,993 19,099 32,588Cash 8,604 3,775 - 66,625 27,113 44,990Non-current assets held for sale 1,114 224 2,858 67,739 27,337 47,848 Total assets 161,016 68,604 110,473 LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (25,766) (12,072) (24,037)Trade and other payables (9,378) (3,492) (5,597)Current tax liabilities - (3,831) (3,145) (2,045)corporation taxDeferred consideration - acquisition (3,000) - - (41,975) (18,709) (31,679) Net current assets 25,764 8,628 16,169 Non-current liabilitiesFinancial liabilities - borrowings (56,099) (17,599) (36,668)Deferred tax liabilities (4,083) (1,209) (2,769) (60,182) (18,808) (39,437) Total liabilities (102,157) (37,517) (71,116) Net assets 58,859 31,087 39,357 Shareholders' equityShare capital 11 3,497 3,887 3,887Share premium 12 23,157 7,959 7,959Other reserves 12 11,472 10,846 10,846Retained earnings 12 20,733 8,395 16,665Total shareholders' equity 13 58,859 31,087 39,357 *Restated - see notes 1 and 2. Consolidated Cash Flow Statement for the six months ended 31 October 2006 6 Months 6 Months Year ended ended Ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) Note £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 14 13,166 2,482 6,729Interest received 2 89 119Interest paid on bank loans and (364) (9) (47)overdraftsInterest element of finance lease (2,110) (864) (1,984)paymentsTax paid (629) - (3,385)Net cash inflow from operating 10,065 1,698 1,432activities Cash flows from investing activitiesPurchase of property, plant and (1,120) (530) (1,274)equipmentProceeds from sale of property 1,912 - 688Proceeds from sale of plant and 11,114 1,902 8,761equipmentAcquisitions (5,418) - -Cash and cash equivalents acquired 556 - -Net cash inflow from investing 7,044 1,372 8,175activities Cash flows from financing activitiesIssue of ordinary share capital 13,000 8,000 8,000Share issue costs (465) (277) (277)Net draw down of revolving credit 5,000 - -facilityInception of bank loans 5,000 - -Bank loan repayments (167) - -Capital element of hire purchase (23,089) (6,349) (22,473)repaymentsDividends paid (1,319) (652) (1,305)Net cash (used in) / generated from (2,040) 722 (16,055)financing activitiesNet increase / (decrease) in cash 15 15,069 3,792 (6,448)Overdraft brought forward (6,465) (17) (17)Cash / (overdraft) carried forward 16 8,604 3,775 (6,465) *Restated - see notes 1 and 2. Notes to the Financial Information for the six months ended 31 October 2006 1. Basis of preparation The Group has previously prepared its financial information in accordance withUK Generally Accepted Accounting Principles ("UK GAAP"). Following the listingof the Group's entire issued ordinary share capital on the Official List of theUK Listing Authority ("Official List") and admission to trading on the LondonStock Exchange's market for listed securities on 1 November 2006, the Group willreport financial information for the accounting period commencing 1 May 2006under International Financial Reporting Standards ("IFRS"). Accordingly, IFRSfinancial information presented in this Interim Report has been prepared usingIFRS accounting policies that the Directors expect to apply in the Group's firstIFRS Annual Report and Accounts for the year ending 30 April 2007. Theseaccounting policies are the same as those included in the prospectus publishedby the Group on 26 October 2006 in connection with its admission to the OfficialList ("Prospectus"), which is available on the Group's website,www.accidentexchange.com. IFRS currently in issue are subject to ongoing amendment by the InternationalAccounting Standards Board and subsequent review and endorsement by the EuropeanCommission and are therefore subject to possible change. Further standards orinterpretations may also be issued that could become applicable for the fullyear consolidated financial information. These potential changes could result inthe need to change the basis of accounting of certain financial information fromthat presented in this Interim Report. In addition, as IFRS is a new reportingbasis for UK companies, accounting practice and interpretations of accountingstandards will continue to develop as companies gain more experience of the newframework. Accordingly there may be changes in the common approaches currentlyadopted. The Group has chosen not to adopt IAS 34 'Interim Financial Statements'in preparing this Interim Report. This Interim Report is not audited but has been reviewed by the Group's auditorsand their review opinion is given below. The reviewed financial information forthe six months ended 31 October 2006 does not constitute statutory financialstatements as defined in section 240 of the Companies Act 1985. Comparativeannual figures for the year ended 30 April 2006 set out within this InterimReport have been extracted from the Prospectus. Statutory consolidated financialstatements for the Group for the year ended 30 April 2006, prepared inaccordance with UK GAAP, on which the auditors gave an unqualified opinion anddid not include a statement under section 237(2) or (3) of the Companies Act1985, have been delivered to the Registrar of Companies. 2. Restatement of prior period comparatives Revenue Recognition - Credit Repair Revenues Credit repair revenues were accounted for on an agency basis in the UK GAAPstatutory accounts for the years ended 30 April 2005 and 2006 with the resultthat the net margin was credited to revenue. Having conducted a detailed reviewof the risks and rewards of this revenue stream, the Directors are now of theopinion that the Group acts as Principal in its credit repair relationships. TheGroup's credit repair revenue recognition policy has therefore been changed sothat credit repair revenues and the associated costs of sale are recognisedgross. This results in an uplift to both revenue and cost of sales of £1.8million for the six months ended 31 October 2005 and £7.9 million for the yearended 30 April 2006. In all instances profit before tax is unaffected. 3. Segmental Analysis The Group operates in one business segment, being the delivery of accidentmanagement and other solutions to the automotive and insurance sectors. Thebusiness operates wholly within the UK, which the Directors consider to be asingle geographical segment. Accordingly, no segmental information for businesssegment or geographical segment is disclosed. 4. Revenue An analysis of the Group's revenue is as follows: 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) £'000 £'000 £'000Delivery of accident management and related 40,044 20,555 53,041services, primarily credit hire of vehiclesCredit repair 12,728 1,912 8,374 52,772 22,467 61,415 Revenue derived from the delivery of accident management and related services,primarily credit hire of vehicles for the six months ended 31 October 2006includes £1,372,000 from DCML Limited, which was acquired during the period. 5. Exceptional costs The Group incurred £767,000 of exceptional administrative expenses during thesix months ended 31 October 2006 (six months ended 31 October 2005 and yearended 30 April 2006: £nil) in connection with its application and subsequentadmission to the Official List of the London Stock Exchange. These exceptionaladministrative expenses have been separately disclosed within this report asthey are non-recurring and significant in nature. 6. Taxation The tax charge for the period is based on the estimated effective tax rate forthe year ending 30 April 2007 applied to the taxable profits for the period. 7. Equity dividends 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) £'000 £'000 £'000Ordinary sharesFinal dividend of 1.0p per share declared - 652 65210 June 2005Interim dividend of 1.0p per share - - 653declared 7 December 2005Final dividend of 2.0p per share declared 1,319 - -14 June 2006 1,319 652 1,305 The Directors are recommending the payment of an interim dividend of 1.5p pershare (2005: 1.0p). The payment will be made on 24 January 2007 to shareholderson the register on 19 December 2006. 8. Basic 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 period. Details of the earnings and weighted average number of shares used in thecalculations are set out below: 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*)Earnings attributable to ordinary 5,263 4,093 12,827shareholders (£'000)Weighted average number of shares - 66,140,614 63,717,529 64,319,615basicBasic earnings per share (pence) 8.0 6.4 19.9 Adjusted earnings per share To understand the underlying trading performance, the Directors consider itappropriate to disclose earnings per share before and after profit on disposalof property, amortisation of acquired intangible assets, exceptionaladministrative expenses and the costs of share based payments. The calculationof adjusted earnings per share is set out below: 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*)Profit on ordinary activities after 5,263 4,093 12,827taxation (£'000)Post-tax profit on disposal of - - (1,803)property (£'000)Post-tax amortisation of acquired 160 - -intangible assets (£'000)Post-tax cost of exceptional items 675 - -(£'000)Post-tax cost of share based 98 107 203payments (£'000)Adjusted profit on ordinary activities 6,196 4,200 11,227after taxation (£'000) Weighted average number of shares - 66,140,614 63,717,529 64,319,615basic Basic earnings per share (pence) 8.0 6.4 19.9Profit on disposal of property - - (2.8)(pence)Amortisation of acquired intangible fixed 0.2 - -assets (pence)Cost of exceptional items (pence) 1.0 - -Cost of share based payments (pence) 0.2 0.2 0.3Adjusted earnings per share (pence) 9.4 6.6 17.4 9. Fully diluted earnings per share The calculation of the fully diluted earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the period after taking account of options in issue overthe Company's ordinary shares and ordinary shares potentially issuable inconnection with the acquisition of DCML (note 17). Earnings attributable toordinary shareholders are adjusted in this calculation for the estimated returnon the proceeds that would arise from issuing all shares held under option. Details of the earnings and weighted average number of shares used in thecalculations are set out below: 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*)Earnings attributable to ordinary 5,302 4,138 12,913shareholders (£'000)Weighted average number of shares - 67,629,158 64,598,190 65,160,372fully dilutedFully diluted earnings per share 7.8 6.4 19.8(pence) Adjusted fully diluted earnings per share The calculation of adjusted fully diluted earnings per share is set out below: 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*)Profit on ordinary activities after 5,302 4,138 12,913taxation (£'000)Post-tax profit on disposal of - - (1,803)property (£'000)Post-tax amortisation of acquired 160 - -intangible assets (£'000)Post-tax cost of exceptional items 675 - -(£'000)Post-tax cost of share based 98 107 203payments (£'000)Adjusted profit on ordinary activities 6,235 4,245 11,313after taxation (£'000) Weighted average number of shares - 67,629,158 64,598,190 65,160,372fully diluted Fully diluted earnings per share 7.8 6.4 19.8(pence)Profit on disposal of property - - (2.8)(pence)Amortisation of acquired intangible fixed 0.2 - -assets (pence)Cost of exceptional items (pence) 1.0 - -Cost of share based payments (pence) 0.2 0.2 0.3Adjusted fully diluted earnings per share 9.2 6.6 17.3(pence) 10. Trade and other receivables 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) £'000 £'000 £'000Trade debtors 42,066 17,264 26,718VAT 1,490 865 757Proceeds from sale of property - - 3,084Other debtors 512 534 863Prepayments and accrued income 1,925 436 1,166 45,993 19,099 32,588 11. Share capital 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited) & Restated) £'000 £'000 £'000Authorised87,485,500 ordinary shares of 5p 5,000 5,000 5,000and 12,514,500 deferred shares of5p Allotted, issued and fully paid69,948,067 (31 October 2005 and 30 3,497 3,887 3,887April 2006: 65,226,480) ordinaryshares of 5p and Nil (31 October2005 and 30 April 2006: 12,514,500)deferred shares of 5p Allotments during the period On 5 May 2006 the Group issued 721,587 new ordinary 5p shares to the vendors ofDCML Limited as part consideration for the acquisition of that company, furtherdetails of which are given in note 17. On 4 October 2006 the Group issued 4,000,000 new ordinary 5p shares at £3.25 pershare, raising £13.0 million before expenses (approximately £12.5 million net).The aggregate nominal value of these shares amounted to £200,000. Purchase of deferred shares In order to simplify its share structure, the Group acquired 12,514,500 of itsown unlisted deferred shares of 5p each on 20 July 2006 for an aggregateconsideration of £1. 12. Reserves Six months ended 31 October 2006 Share Other Retained Total premium reserves earningsThe Group £'000 £'000 £'000 £'000At 30 April 2006 7,959 10,846 16,665 35,470Profit for the period - - 5,263 5,263Dividends paid (note 7) - - (1,319) (1,319)Share options - value of employee - - 140 140serviceDeferred tax on share options - - (16) (16)Issue of share capital 15,198 - - 15,198Purchase of own shares - 626 - 626At 31 October 2006 23,157 11,472 20,733 55,362 Six months ended 31 October 2005 Share Other Retained Total Premium reserves earningsThe Group £'000 £'000 £'000 £'000At 30 April 2005 410 10,846 4,824 16,080Profit for the period - - 4,093 4,093Dividends paid (note 7) - - (652) (652)Share options - value of employee - - 130 130serviceIssue of share capital 7,549 - - 7,549At 31 October 2005 7,959 10,846 8,395 27,200 A reconciliation of reserves for the year ended 30 April 2006 is given on page94 of the Prospectus (see note 1). Other reserves relate to the difference of £10,846,000 between the market valueand the nominal value of shares issued as consideration for the acquisition ofAccident Exchange Limited in April 2004, where the Group has taken advantage ofSection 131 of the Companies Act 1985, and an amount of £626,000 transferredfrom share capital upon acquisition of the deferred shares (note 11). 13. Statement of changes in shareholders' equity 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) £'000 £'000 £'000Profit for the period 5,263 4,093 12,827Dividends paid (note 7) (1,319) (652) (1,305)Share options - value of employee 140 130 290serviceDeferred tax on share options (16) - 29Issue of share capital 15,434 7,723 7,723Net increase in shareholders' 19,502 11,294 19,564fundsOpening shareholders' equity 39,357 19,793 19,793Closing shareholders' equity 58,859 31,087 39,357 14. Cash generated from operations Reconciliation of net profit to cash generated from operations: 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited (Audited & & Restated*) Restated*) £'000 £'000 £'000Net profit 5,263 4,093 12,827Adjustments for:Tax 2,628 1,806 5,680Depreciation 6,912 2,516 7,563Loss / (profit) on disposal of plant 623 37 (1)and equipmentProfit on disposal of property - - (2,600)Amortisation of intangible assets 249 21 41Non-cash employee benefit expense - 140 130 290share based paymentsInterest income (2) (88) (118)Interest expense 2,534 872 2,030Changes in working capital:Increase in trade and other (9,172) (6,327) (11,064)receivablesDecrease / (increase) in claims 374 (1,857) (10,020)in progressIncrease in payables 3,617 1,279 2,101Cash generated from operations 13,166 2,482 6,729 15. Reconciliation of net cash flow to movement in net debt 6 Months 6 Months Year ended ended ended 31 October 31 October 30 April 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Increase / (decrease) in cash in 15,069 3,792 (6,448)the periodCapital element of finance lease 23,089 6,349 22,473paymentsNet draw down of revolving credit (5,000) - -facilityInception of bank loans (5,000) - -Bank loan repayments 167 - -Decrease in net debt resulting from 28,325 10,141 16,025cash flowsDebt acquired with subsidiary (194) - -Inception of hire purchase (40,687) (18,688) (59,381)contractsIncrease in net debt during the period (12,556) (8,547) (43,356)Net debt brought forward (60,705) (17,349) (17,349)Net debt carried forward (73,261) (25,896) (60,705) 16. Analysis of changes in net debt As at As at 30 April Acquisition Non-cash 31 October 2006 Cash flows of items 2006 subsidiary (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) £'000 £'000 £'000 £'000 £'000Cash - 8,604 - - 8,604Bank overdraft (6,465) 6,465 - - - (6,465) 15,069 - - 8,604Revolving credit - (5,000) - - (5,000)facilityBank loans - (4,833) (22) - (4,855)Hire purchase (54,240) 23,089 (172) (40,687) (72,010)contractsNet debt (60,705) 28,325 (194) (40,687) (73,261) 17. Acquisition of DCML Limited On 2 May 2006, Accident Exchange Group Plc announced the conditional acquisitionof the whole of the issued voting share capital of DCML Limited ("DCML") for atotal consideration of up to £12 million. DCML provides business software solutions across the automotive industry, fromcar manufacturers through their franchised dealers, into repairers andbodyshops. In its audited financial statements for the ten months ended 30 April2006 DCML reported turnover of £2.0 million, profit before taxation of £500,000and net assets of £424,000. DCML operates from long leasehold premises inStockport, Cheshire and employs 27 people. The total consideration for the acquisition is made up of initial considerationof £8 million and deferred consideration of up to £4 million. The initialconsideration was satisfied as to £5 million in cash (raised by entering into a6 year term loan) and £3 million by the issue of 721,587 new ordinary 5p sharesdirect to the vendors of DCML at a price of 415.75p per share (being the averageof the mid market price for the five previous days prior to the announcement ofthe acquisition). The acquisition was conditional on the admission of the newordinary shares to trading on the Alternative Investment Market, which occurredon Friday 5 May 2006. The deferred consideration is payable in shares or loan notes at the option ofthe Group and the Directors' current estimate, based on their expectations ofDCML's performance against targets upon which the amount of deferredconsideration payable is dependent, is that the probable maximum deferredconsideration payable will be £3 million and goodwill has therefore beendetermined on this basis. All intangible assets are recognised at fair value and the residual excess ofthe fair value of the consideration over the fair value of the identifiable nettangible and intangible assets acquired is recognised as goodwill. 17. Acquisition of DCML Limited (continued) The fair values of the assets and liabilities acquired is as follows: Fair value (Unaudited) £'000Intangible assets:Customer contracts and 2,161relationshipsSupplier contracts and 1,434relationshipsProperty, plant and equipment 449Receivables 673Payables (1,059)Taxation:Current (16)Deferred (1,068)Cash and cash equivalents 556Bank loan (22)Hire purchase contracts:Due within one year (79)Due after more than one year (93)Net assets acquired 2,936Goodwill 8,610Consideration 11,546 There are no differences between these fair values and the carrying value ofDCML's assets and liabilities immediately prior to acquisition, save forintangible assets and the related deferred tax liability which have beenrecognised only with effect from the date of acquisition. The fair value of the purchase consideration is analysed as follows: Fair value (Unaudited) £'000Shares issued 3,000Cash 5,000Deferred consideration 3,000Directly attributable costs 546Consideration 11,546 The outflow of cash resulting from the acquisition is as follows: £'000Cash consideration 5,000Directly attributable costs paid 418Cash and cash equivalents acquired (556) 4,862 18. Reconciliation of net assets and profit under UK GAAP to IFRS (unaudited) Reconciliations of the UK GAAP profit and loss account for the year ended 30April 2006 and the UK GAAP balance sheet at that date to their IFRS equivalentsare included in the Prospectus dated 26 October 2006, which is available fromthe Group's website, www.accidentexchange.com. i) Reconciliation of net assets as reported under UK GAAP as at 31 October 2005to the revised net assets under IFRS as at 31 October 2005 included in thisInterim Report: Note UK GAAP Effect of IFRS transition to IFRS £'000 £'000 £'000AssetsNon-current assetsGoodwill (a) 12,069 984 13,053Intangible assets 144 - 144Property, plant and equipment (b) 28,294 (224) 28,070 40,507 760 41,267 Current assetsClaims in progress (c) - 4,239 4,239Trade and other receivables (c) 23,338 (4,239) 19,099Cash and cash equivalents 3,775 - 3,775 27,113 - 27,113Non-current assets held for sale (b) - 224 224 27,113 224 27,337Total assets 67,620 984 68,604 LiabilitiesCurrent liabilitiesFinancial liabilities - (12,072) - (12,072)borrowingsTrade and other payables (d) (3,436) (56) (3,492)Current tax liabilities - (3,145) - (3,145)corporation tax (18,653) (56) (18,709)Net current assets 8,460 168 8,628 Non-current liabilitiesFinancial liabilities - (17,599) - (17,599)borrowingsDeferred tax liabilities (e) (1,252) 43 (1,209) (18,851) 43 (18,808)Total liabilities (37,504) (13) (37,517)Net assets 30,116 971 31,087 Shareholders' equityShare capital 3,887 - 3,887Share premium 7,959 - 7,959Other reserves 10,846 - 10,846Retained earnings 7,424 971 8,395Total shareholders' equity 30,116 971 31,087 18. Reconciliation of net assets and profit under UK GAAP to IFRS (unaudited)(continued) ii) Reconciliation of profit as reported under UK GAAP for the six months ended31 October 2005 to the revised profit under IFRS for the six months ended 31October 2005 included in this Interim Report: Note UK GAAP Effect of UK GAAP Effect of IFRS - as change in - as transition reported accounting restated to IFRS policy £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue (f) 20,651 1,816 22,467 - 22,467Cost of sales (f) (9,667) (1,816) (11,483) (37) (11,520)Gross profit 10,984 - 10,984 (37) 10,947Administrative (a),(d) (4,643) - (4,643) 379 (4,264)expensesOperating profit 6,341 - 6,341 342 6,683Finance costs - (784) - (784) - (784)netProfit before tax 5,557 - 5,557 342 5,899Taxation (e) (1,825) - (1,825) 19 (1,806)Profit for the 3,732 - 3,732 361 4,093year fromcontinuingoperations Basic earnings per 5.9p - 5.9p 0.5p 6.4pshare Fully diluted 5.9p - 5.9p 0.5p 6.4pearnings per share Explanation of reconciling items between UK GAAP as reported, UK GAAP asrestated and IFRS. a) Under IFRS 3 'Business combinations' goodwill arising on acquisitions madesince 1 May 2004 is not subject to amortisation but is tested for impairmentannually and whenever there is an indication that it may be impaired. Goodwillwas tested for impairment at transition to IFRS (1 May 2004) and at eachsubsequent period end (30 April 2005 and 31 October 2005) and no impairmentadjustments were identified. Non-amortisation of goodwill results in an increasein pre-tax profits of £328,000 for the six months ended 31 October 2005 and anincrease in shareholders' equity of £984,000 at 31 October 2005. b) Under IFRS 5 any non-current assets held for sale at the balance sheet dateare reclassified as current assets. This has no impact upon profits orshareholders' equity. c) The value of claims in progress has been presented separately on the face ofthe balance sheet given the significance of this un-invoiced receivable in thecontext of the total receivables. d) IAS 19 'Employee benefits' requires the Group to provide the cost of holidaypay earned by its employees but not taken as at each year end. The cost ofproviding for holiday pay resulted in an increase in pre-tax profits of £14,000in the six months ended 31 October 2006 and a reduction in shareholders' fundsat 31 October 2005 of £56,000. e) The deferred tax adjustment results from two items. Firstly, the holiday payprovision described under item (d) above gives rise to a deferred tax asset as afuture tax benefit is expected to accrue when the holiday pay provision isrecognised in the company's accounts. Secondly, IFRS requires deferred tax to beprovided on the difference between the share option exercise price and themarket price at the balance sheet date. As a result, the tax effect will notcorrelate to the Income Statement charge. The excess of the deferred tax overthe cumulative Income Statement charge at the tax rate is recognised directly inequity. f) Credit repair revenues were accounted for on an agency basis during the sixmonths ended 31 October 2005 with the result that the net margin was credited torevenue. Having conducted a detailed review of the risks and rewards of thisrevenue stream, the Directors are now of the opinion that the Group acts asPrincipal in its credit repair relationships. The Group's credit repair revenuerecognition policy has therefore been changed so that credit repair revenues andthe associated cost of sale are recognised gross. This results in an uplift toboth revenue and cost of sales of £1.8 million for the six months ended 31October 2005. This change in accounting policy affects the historical results as publishedunder UK GAAP and does not result from IFRS conversion. Accordingly, the UK GAAPresults have been restated in the profit reconciliation presented above. Thechange in accounting policy is purely presentational and has no impact uponprofit or shareholders' equity. Independent Review Reportto Accident Exchange Group Plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 31 October 2006 which comprises the consolidated balancesheet as at 31 October 2006 and the related consolidated statements of income,cash flows and recognised income and expense for the six months then ended andrelated notes. We have read the other information contained in the InterimReport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilities The Interim Report, including the financial information contained therein, isthe responsibility of, and has been approved by the Directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This Interim Report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for theCompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 October 2006. PricewaterhouseCoopers LLP Chartered Accountants Birmingham 13 December 2006 Notes: a) The maintenance and integrity of the Accident Exchange Group Plc web site isthe responsibility of the Directors; the work carried out by the auditors doesnot involve consideration of these matters and, accordingly, the auditors acceptno responsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. b) Legislation in the United Kingdom governing the preparation and disseminationof financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange