ACE.L Regulatory News (ACE)

23 Oct 2007 15:12

Accident Exchange Group PLC23 October 2007 FOR IMMEDIATE RELEASE 23 October 2007 Accident Exchange Group Plc PRE CLOSE TRADING UPDATE AND BOARD CHANGE The Board of Accident Exchange Group Plc ("Accident Exchange" or "the Group")announces a trading update for the six months ending 31 October 2007 and alsoprovides details of a board change. Trading Update Trading for the half year is expected to be broadly in line with the board'sexpectations. Rental days for the period will be approximately 510,000 and aretherefore up materially on the comparative period last year (2006: 290,000days). Encouragingly, rental day growth in October is forecast to be upapproximately 9% on September after a slower than expected August and September. During the second quarter a previously announced pilot relationship with asingle insurer was extended and a new agreement reached with a further insurerto provide credit hire services to those of its customers involved in non faultaccidents. That second relationship, which is at an early stage in itsdevelopment, is currently performing ahead of initial expectations. At the time of the annual general meeting in August we emphasised that the Groupwas focused on improving gross margins through fleet mix and utilisationenhancement and was also focused on cash collection. The work necessary toimprove those core fleet indicators remains ongoing and whilst gross margins forthe first half will be down slightly as compared to the second half of thefinancial year ended 30 April 2007, we believe that progress recorded in Q2 willreflect positively as we enter the seasonally beneficial second half of ourfinancial year. Overall fleet utilisation of approximately 62.4% has improved slightly in Q2 todate from Q1 (59.7%) though the margin effect of this is offset by the fact thatthe proportion of prestige chargeable rental days is static at approximately 54%in Q2 compared with the figure of 55% reported for Q1 at the time of the AGM.Efforts continue to align the fleet mix and the holding costs of the rentalfleet to the referral profile of our differing referral sources to deliverhigher overall utilisation levels and margin improvement in the second half. Legal update and cash flow The Board was delighted to hear on 19 October that solicitors acting for ourclient in the case of Corbett v Gaskin (re our "A" agreements) had receivedformal notification that the solicitors acting for the defendant insurers wouldnot appeal the judgment handed down in that case. In respect of the other testcase, Barker v First West Yorkshire Limited (re our "X" agreements), the timefor an appeal to be lodged passed without event on 15 October. The Group's focus remains on cash collection. There are currently a variety ofinitiatives and opportunities being pursued by the Group's panel solicitors withthe aim of accelerating claim settlement on both those cases affected by thepreviously litigated enforceability argument and the majority of claims whichhave not been party to the challenge. The Group started to utilise litigation as a meaningful part of its cashcollection strategy in the summer of 2007. Almost 1,300 solicitor referred casessettled in H1 from a total of over 4,000 which have now been settled with theassistance of our solicitor panel. Almost 50% of those 4,000 cases that settleddid so before proceedings were actually issued against the negligent party and afurther 25% settled after proceedings were issued but before a defence wasreceived. This is a positive affirmation of the role of solicitors in the claimsettlement process and the Board remains confident that the use of the Group'spanel of solicitors will accelerate the collection of cash without necessarilyrequiring every claim to proceed to a hearing date. The Group thereforecontinues to invest in the infrastructure, personnel and systems necessary toensure that claims that are not settled within the terms of the ABI GTA aresettled in a controlled and timely manner. In addition, and specifically in respect of those claims which have been subjectto the enforceability challenge, a number of negotiations with insurers areongoing and, in the ordinary course of business, individual claim by claimsettlement negotiations continue. In the aftermath of the recent legaljudgments, early indications are encouraging with an increasing number of offersto settle those previously disputed cases and a higher value of cases havingbeen settled during the first 21 days of October compared with the whole ofSeptember. Despite these early signs, it is too early to forecast the rate of settlement ofthose cases caught by the enforceability arguments although the rate ofcollection is expected to be steady rather than rapid. Until the cash generatedfrom settlements involving these claims improves more materially, the Boardcontinues to consider the appropriateness of the Group's financial structure. Board Change The Board wishes to announce that Daksh Gupta, Chief Operating Officer, tenderedhis resignation from the Board yesterday and his resignation was accepted withimmediate effect. Although Daksh has done much to improve the operational efficiency of the Group,he has expressed his desire to return to the automotive retail sector where hehas spent most of his professional career. The Board would like to thank Dakshfor his contribution to the business and wish him well in his future endeavours. The role of Chief Operating Officer is not currently intended to be replaced asthe Group's senior management team has been strengthened and expandedconsiderably over the last twelve months. The department heads of the keybusiness units will now report directly to the Chief Executive, Steve Evans, whois now able to devote considerably more of his time to operational and cashmanagement aspects of the business. Ends CONTACTS: Accident Exchange Group PlcSteve Evans, Chief Executive 08700-116 719Martin Andrews, Group Finance Director 08700-053 649 Numis Securities Ltd 020-7260-1000Chris Wilkinson, Corporate Broking BanksideSteve Liebmann or Simon Bloomfield 020-7367-8888 About Accident Exchange Based in Coleshill, West Midlands, Accident Exchange delivers accident management and other solutions to automotive and insurance related sectors. Fully listed, the stock code is LSE: ACE. This information is provided by RNS The company news service from the London Stock Exchange