RNS Number : 8052X
Accident Exchange Group PLC
30 June 2008
Accident Exchange Group Plc
RESULTS FOR THE YEAR ENDED 30 APRIL 2008
Accident Exchange Group Plc ("Accident Exchange", the "Company" or the "Group") announces
its audited results for the year ended 30
April 2008. These results are reported under International Financial Reporting Standards
("IFRS").
Highlights
Financial Highlights
* Revenue: up 41% to £165.1 million (2007: £116.9 million).
* Profit before taxation: £12.1 million (2007: £13.6 million).
* Adjusted* profit before taxation: £16.1 million (2007: £18.0 million).
* EPS: 11.7p (2007: 13.2p); adjusted* EPS: 16.3p (2007: 18.2p).
* Raised £46.6 million net of expenses from the issue of £50.0 million 5.50%
unsecured convertible notes due 2013.
* Cash at bank £27.0 million (2007: £6.9 million); working capital headroom against
bank facilities: £37.0 million (2007: £6.9
million).
* Proposed final dividend of 1.5p (2007: 1.5p) resulting in total dividends for the
year of 2.5p (2007: 3.0p).
* stated before amortisation of acquired intangible assets, costs of share based
payments, change in fair value of derivative
financial liability and exceptional costs.
Operational Highlights
* Defeated the legal challenge.
* Refinanced the Group's working capital facilities.
* Implemented a robust strategy of pursuing claims through litigation where the
insurers fail to settle within the ABI General Terms
of Agreement.
* Increase in daily cash receipts towards the end of the year and beyond, having
defeated the legal challenge.
* Further growth in key business metrics:
* Supplied rental vehicles to 41,000 customers (2007: 31,000).
* Number of rental days up 57% to 1.1 million (2007: 0.7 million).
* Rental fleet up 20% to 4,850 vehicles (2007: 4,033 vehicles).
* Staff numbers up 12% to 715 (2007: 639).
* Received the Institute of Transport Management Awards for Innovation in Vehicle
Remarketing 2008 and Accident Management Company
of the Year 2008.
* Commenced the provision of strategic and resource support for Bentley Motors' global
paint and body repair network.
David Galloway, Non-Executive Chairman, stated:
"In spite of the uncertain global economic outlook, we are looking to the future with
renewed confidence. The demand for the services we
offer continues to grow and we see further opportunities working more closely with existing
referrers, vehicle manufacturers and other
referral sources and from new product initiatives that are being marketed for the first time.
"We have a strong management team, a market place which is continuing to grow and a strong
balance sheet.
"Your Board is confident that the current year will be one of improving cash flow and
further growth."
CONTACTS:
Accident Exchange Group Plc
Steve Evans, Chief Executive Today:
020-7367-8888; thereafter on: 08700-116-719
Martin Andrews, Group Finance Director Today: 020-7367-8888;
thereafter on: 08700-053-649
Bankside
Steve Liebmann or Simon Bloomfield
020-7367-8888
About Accident Exchange
Based in Coleshill, West Midlands, Accident Exchange delivers accident management and
other solutions to the automotive and insurance
related sectors. Fully listed, the stock code is LSE: ACE.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that in spite of a very difficult year for the Group, our results
for the year ended 30 April 2008 were in line
with our expectations following the announcement of the £50.0 million Convertible Notes
fundraising in December 2007.
As has already been well documented, the past year was exceptionally difficult. Enormous
effort was expended dealing with the
ramifications of and defeating the legal challenge to our terms and conditions of hire which
started in late 2006 and which affected all
aspects of the business, particularly our cash flows. Having defeated that challenge in
October 2007, the Group's £45.0 million working
capital facility put in place in June 2007 was supplemented by the issue of £50.0 million
Convertible Notes in January 2008.
The legal challenge is now behind us and the management team is now able to refocus its
efforts on improving cash flow and margins and
to taking advantage of the substantial opportunities for growth.
Business model and market positioning
When car accidents happen, our role is to get the non fault party back on the road as
quickly as possible and then look after their
claim. It is well established in law that to remain mobile whilst their own car is not
drivable, the non fault party is entitled to recover
the costs of hiring a car similar to their own from the at fault driver's insurer.
In the event of an accident, motorists generally seek immediate assistance from either
their motor insurer or their local franchised
motor dealership (or an affiliated dealer-approved body shop). The owners of more expensive or
prestige vehicles often have an ongoing
relationship with their motor dealer and are likely to correctly perceive their dealer as
being best placed to repair their damaged vehicle
to manufacturer approved standards and to minimise any negative effect on the residual value
of the repaired vehicle.
To date we have focused our efforts on building a strong referral network with the dealers
and manufacturers of prestige cars.Accordingly, our rental fleet of 4,850 vehicles as at 30 April 2008 (2007: 4,033) includes a
high proportion of prestige manufacturer brands
such as BMW, Audi, Mercedes Benz, Porsche, Bentley and Aston Martin. With over 180 employed
delivery drivers, we can usually provide a 'like
for like' car within hours if necessary.
On referral and validation by us that we can prove that fault for the accident lies with
another party, a well-defined process is
initiated with the non fault driver signing a replacement vehicle hire agreement with us; the
hire charges for which we recover in due
course from the insurer of the at fault driver. Generally, settlement is pursued in accordance
with the General Terms of Agreement between
the Association of British Insurers and credit hire operators.
To speed up the repair process, we may also provide assistance to both our customer and
the repairer of the vehicle by funding the
repairs to our customer's vehicle and then recovering those repair costs from the insurer of
the at fault driver. Whilst this credit repair
business has a low margin, it facilitates our customers getting back into their own car as
soon as possible.
Recovering our hire charges from the at fault insurer can be a lengthy and involved task.Whilst each claim is validated by us to ensure
to our satisfaction that liability for the accident rests with the other driver, that the
repair is carried out correctly and in a timely
manner and that the rental charges we seek to recover are appropriate, recovery periods can
sometimes be lengthy and ultimately can result
in us resorting to legal means to recover the charges. This is ordinary course of business
within the sector in which we operate.
Effects of the defeated legal challenge
The defeated legal challenge that questioned the enforceability of certain of our
historical credit hire agreements continued through
the whole of the first half of the financial year. Your Board and its advisors were always
confident that we would defeat this challenge but
not doing so until October 2007 put enormous strain on our financial resources as insurance
companies slowed their payment cycle to us on
all their debt, not just the debt which was subject to the challenge.
In response to these events we refinanced the Group, firstly with a £45.0 million working
capital facility provided by Morgan Stanley
(which replaced our then existing £25.0 million facility) and subsequently with the issue of
the £50.0 million 5.50 per cent. Convertible
Notes, again arranged and underwritten by Morgan Stanley. Given the state of the global credit
markets over this period, we believe this was
an excellent outcome.
The true cost to the Group of dealing with, and ultimately defeating, the legal challenge
is difficult to quantify. The Board believes
that the uncertainties it caused adversely affected confidence amongst our referral channels
and therefore our revenue levels and,
consequently, our fleet utilisation and margins. Damage was also done to the Group's
reputation given some of the reckless accusations that
were made in court by our opponents during the course of the challenge.
Over £0.6 million of direct legal costs were incurred on the two concurrent test cases
and the other lead cases that were decided in our
favour in un-appealed judgments. These costs have been expensed during the year and, subject
to the successful outcome of the relevant cost
hearings, may be recoverable in the future. In the lead case of Corbett v. Gaskin, both our
client's costs and our own costs have already
been awarded, to be paid by the defendant on an indemnity basis. The Board is optimistic in
respect of the cost hearing in the second test
case which is due to be determined in the near future. Without distracting ourselves from the
primary task of further cash flow improvement,
we will also continue to explore the options for recovering other fees incurred by, and damage
caused to, the Group as a result of the
behaviour of the protagonists to the legal challenge.
Since defeating the legal challenge the Group has been implementing a rigorous process of
debt recovery. Debt which is older than 120
days is now transferred automatically to a recently enlarged panel of solicitors who commence
litigation on behalf of our clients. The
increased volume of referrals to our solicitor panel is expected to deliver further
improvement in cash flows during the current year.
The legal challenge put enormous pressure on the business and, not surprisingly, our
competition sought to benefit from this. However,
the strength and depth of our relationships with our referring partners is reflected in the
growth in referrals and revenues during the year
under review. Equally important is increasing awareness amongst our referring partners of the
additional customer loyalty created by the
provision of effective accident management services. I am very grateful to all of our referral
partners for their support during this
difficult period and beyond.
Financial results and dividends
Revenue increased by 41% to £165.1 million (2007: £116.9 million). Adjusted profit
before tax (stated before amortisation of acquired
intangible assets, costs of share based payments, change in fair value of derivative financial
liability and exceptional costs) was £16.1
million (2007: £18.0 million). Profit before tax was £12.1 million (2007: £13.6 million).Both profit before tax and adjusted profit before
tax were impacted by an increase in net finance costs to £13.0 million (2007: £6.0 million). Gross margin reduced to 34.6% (2007: 36.9%),
principally as a result of fleet mix and utilisation together with a higher proportion of
mainstream rental days compared to prestige rental
days.
Adjusted basic earnings per share was 16.3 pence (2007: 18.2 pence) and basic earnings per
share was 11.7 pence (2007: 13.2 pence).
The legal challenge adversely impacted cash flows resulting in debtor days rising to 227
days as at 30 April 2008 (2007: 176 days) and
required the Group to seek the additional financing already summarised as above.
As at 30 April 2008 cash at bank was £27.0 million (2007: £6.9 million). A £10.0
million revolving credit facility also remains
available for draw down under the Morgan Stanley Facility, giving the Group total working
capital headroom against bank facilities as at 30
April 2008 of £37.0 million (2007: £6.9 million).
Total net debt as at 30 April 2008 was £149.0 million (2007: £96.6 million) reflecting
primarily an increase in vehicle finance lease
obligations to £97.3 million (2007: £77.0 million) and the Convertible Notes of £50.0
million raised in the year.
Your Board is proposing a final dividend for 2008 of 1.5 pence per share (2007: 1.5 pence
per share), making a total for the year of 2.5
pence per share (2007: 3.0 pence per share). Subject to the approval of shareholders at the
Annual General Meeting on 6 August 2008, the
final dividend will be paid on 9 September 2008 to shareholders on the register on 15 August
2008.
Strategy
With the legal challenge now behind us, management is now refocused on developing the
business. Our priorities remain to:
* Continue to improve cash receipts;
* Focus on fleet and operational costs and thereby, with a combination of the above,
improve margins; and
* Maintain and enhance our position as the supplier of choice to dealers and vehicle
manufacturers.
People
The Group's rate of growth, coupled with the additional challenges faced last year, put
considerable demands on management and staff.Their dedication and commitment has been truly outstanding, especially in the finance and
legal departments which shouldered the majority of
the workload.
I am delighted that the take-up of the Sharesave scheme, introduced in February 2008, has
been so positive with nearly half of all
eligible employees subscribing.
Your Board and the senior management team have worked tirelessly to ensure the Group's
successful refinancing. My thanks go to each and
every member of the Group who have worked so very hard and to such good effect.
Outlook
In spite of the uncertain global economic outlook, we are looking to the future with
renewed confidence. The demand for the services we
offer continues to grow and we see further opportunities working more closely with existing
referrers, vehicle manufacturers and other
referral sources and from new product initiatives that are being marketed for the first time.
We have a strong management team, a market place which is continuing to grow and a strong
balance sheet.
Your Board is confident that the current year will be one of improving cash flow and
further growth.
David Galloway
Non-Executive Chairman
30 June 2008
BUSINESS REVIEW
Introduction
Accident Exchange is one of the UK's leading suppliers of credit hire replacement vehicles
to customers of the automotive industry. We
also deliver accident management and vehicle hire solutions to the contract hire, leasing and
insurance related sectors and provide software
services and daily rental insurance to motor dealers who themselves provide courtesy cars to
their own customers.
Our business is structured to service the market through two principal operating
subsidiaries: Accident Exchange Limited and DCML
Limited. Accident Exchange operates from our head office in Coleshill, West Midlands, and has
regional depots in Glasgow and Warrington and
will shortly be opening a depot in Belfast. DCML operates from its offices in Stockport. Our
services are provided throughout the whole of
the UK.
Our mission is to remain number one in our chosen market sector by placing our customers
at the centre of everything we do whilst
continuing to build and develop an unbeatable team with shared values and with accountability
for consistently delivering high levels of
personal and operational performance.
Highlights of the year
Despite the enormous challenges of the past year, the Group not only prevailed against the
legal challenge but also delivered revenue of
£165.1 million, up 41% compared to the previous year (2007: £116.9 million). In addition we
have:
* Refinanced the Group's working capital facilities with working capital facility
headroom at 30 April 2008 of £37.0 million (2007:
£6.9 million);
* Implemented a robust strategy of pursuing claims through litigation where the
insurers fail to settle within the ABI General Terms
of Agreement;
* Seen an increase in daily cash receipts towards the end of the year and beyond,
having defeated the legal challenge;
* Supplied rental vehicles to 41,000 customers (2007: 31,000 customers);
* Increased rental days to 1.1 million (2007: 0.7 million);
* Increased our rental fleet to 4,850 vehicles (2007: 4,033 vehicles);
* Received the Institute of Transport Management Awards for Innovation in Vehicle
Remarketing 2008 and Accident Management Company
of the Year 2008; and
* Commenced the provision of strategic and resource support for Bentley Motors' global
paint and body repair network;
The history of the legal challenge we faced in 2007 has been well documented and is not
repeated here, save to say that it had a
material impact on both the results and cash flows for the year. Nevertheless, it has now been
defeated and the Board is confident cash
flows will continue to improve. With the considerable distraction it represented now behind
us, greater focus is being given to improvement
in our cash collection processes, fleet alignment, utilisation improvement and thereby, margin
improvement.
Operations
The Board did not actively seek growth opportunities during the year because of its cash
consumptive consequences. However, the customer
service quality implicit in our service and the strength of the relationships we have
developed with our existing referrers nevertheless
contributed to revenue growth of 41% in the year.
Hire starts grew from 31,000 to 41,000, rental days from 0.7 million to 1.1 million,
headcount from 639 to 715 and (despite the legal
challenge) cash collected from insurers from £88.7 million to £133.0 million. Operationally
we are now expecting to see the benefits of
scale come through in reduced vehicle costs, for example, as manufacturers increase their
level of support and also in terms of a lower rate
of headcount increase. The leadership skills of the senior management team, together with
in-house IT system enhancements, have improved
processes in the key operational aspects of the business in the year. The benefits of this,
particularly in cash collection processes, are
now starting to be seen, albeit not reflected in the results for the year under review.
We will continually strive for an appropriate balance between the size and shape of the
rental fleet and the profile of referral volumes
so that we can maintain like-for-like vehicle replacement on a brand-by-brand and
model-by-model basis without utilisation being unduly
affected. The Board believes the legal challenge reduced revenues in the year and,
consequently, impacted fleet utilisation with H1 and H2
at broadly similar levels of 60.8% (2007: 61.2%) and 60.2% (2007: 60.1%) respectively.However, utilisation improved in the last quarter of
the financial year to 63.9% and ended the year at 69.5% - very close to our targeted level of
70%.
From an operational perspective our existing depots in Coleshill, Glasgow and Warrington
have very recently been supplemented by a depot
in Belfast and a depot to the East of London is close to being finalised. These additional
depots will enable faster delivery times as well
as reduced costs of delivery.
Meanwhile we are pleased to note the recent 3.5% increase in car hire rates agreed by the
Association of British Insurers under the
General Terms of Agreement.
Product innovation
During the year we continued to develop our range of services. Examples of this innovation
include:
Strategic accident repair consultancy for car manufacturers
Our consultancy-led approach was behind Bentley Motors' decision to engage us to provide
strategic and resource support for its global
paint and body repair network. Discussions are underway with other manufacturers to fulfil
similar roles.
Tackling fraud for the insurance industry
In an effort to tackle both our own and the wider industry's exposure to potential fraud,
we have taken a technology-led preventative
approach by developing our own risk assessment software called FREDA. FREDA is used by our
Asset Protection Unit which is staffed by former
Special Branch and CID personnel and it has enabled us to work proactively with insurers and
the Police to identify and investigate suspect
individuals and increasingly sophisticated criminal gangs. The intelligence gathered has
already assisted insurers and police forces across
the UK.
AE Car Auction.com
The introduction of an online, trade-only disposal website for the Group's fleet not only
improved the vehicle remarketing programme,
but now drives it. More than 400 motor dealers use the website regularly to purchase quality
used car stock, with many increasingly 'buying
to order' for their customers.
Awards for innovation
Our innovative culture, dedication and commitment to delivering record breaking levels of
customer service has led to us receiving a
number of awards from industry associations in the last year including two Institute of
Transport Management awards for "Innovation in
Vehicle Remarketing 2008" and "Accident Management Company of the Year 2008".
Financial results
Revenue
Revenue for the year rose 41% to £165.1 million (2007: £116.9 million). Revenue from
accident management and related services ("Accident
Management Revenue") grew by 42% to £124.8 million (2007: £88.1 million), of which £3.2
million (2007: £2.8 million) was contributed by
DCML. Lower margin Credit Repair Revenue grew by 40% to £40.3 million (2007: £28.8
million).
Accident Management Revenue growth of 42% reflects 1.1 million rental days compared to 0.7
million rental days for the prior year,
growth of 57%. Prestige rental activity increased to 0.6 million days (2007: 0.4 million days)
and mainstream vehicle rental activity
increased to 0.5 million days (2007: 0.3 million days). The growth in lower margin mainstream
rental days reflects certain large dealer
account wins and new insurer and contract hire and leasing company referral volumes, as a
result of which 47% of rental days were generated
by mainstream vehicles in the year compared to 37% in the comparative period.
Gross margins
Overall gross margin has reduced to 34.6% (2007: 36.9%) principally as a result of the
fleet mix and utilisation (see below), and the
relative higher proportion of mainstream rental days compared to prestige rental days.
Fleet
Fleet and utilisation
Growth in Accident Management activity led to expansion of the overall rental fleet during
the year. In the first half of the year the
rental fleet rose from 4,033 vehicles to 4,999 vehicles. With stronger control and a fleet
alignment programme exercised during the second
half of the year, the rental fleet subsequently reduced in size to 4,850 vehicles as at 30
April 2008 facilitating utilisation improvement
in the last quarter of the year.
In the last quarter of the year particularly, with the legal challenge and funding
requirements resolved, the Board took action to
dispose of additional vehicle volumes in order to attain utilisation and profit improvement
rather than continuing to carry the longer term
holding costs of those vehicles. This action resulted in cars being disposed of at a younger
age than originally anticipated and also
incurred losses against three particular model variants of one manufacturer brand where,
notably, model changes took place in the year.Utilisation in the last quarter improved to 63.9% as a result and has since improved further
to 67.2% today. The Board maintains its target
of 70% for overall fleet utilisation.
Depreciation policy
The Board is aware that the current economic climate will place additional focus on the
appropriateness of the current depreciation rate
(increased from 20% to 22.5% last year) and believes that without the effect on revenue of the
legal challenge, and with the additional
manufacturer support now being received against more recent car purchases, the current
depreciation rate is appropriate. Nevertheless,
depreciation rates will be kept under review.
Vehicle disposal channels
In November 2007 the Group developed and launched AE Car Auction, a Business-to-Business
internet based vehicle re-marketing programme.AE Car Auction had the aim of improving the flexibility around the disposal of the rental
fleet, reducing the cost associated with vehicle
disposals and maximising the proceeds from those disposals. Whilst the conventional physical
auction process remains the principal disposal
channel by volume, the electronic auction web site will become an increasingly important part
of the Group's disposal strategy.
The Group now has more than 800 dealers registered to bid on the site and 620 vehicles
with a disposal value of more than £11.5 million
have been sold through this channel in the last five months. The quality of the site has been
recognised by the Institute of Transport
Management which has presented the Group with the award for Innovation in Vehicle Remarketing
2008.
Credit repair revenue and margin
Credit repair revenue, a driver of higher margin credit hire revenue, accounted for 24% of
total revenue, broadly consistent with the
prior year (2007: 25%). Credit repair margin of 5% was unchanged from the prior year. Whilst
the Group has achieved significant growth in
both credit hire and repair revenue during the year, the Board remains focused on
re-establishing a higher proportion of prestige rental
days to improve overall margins.
Administrative expenses
Total administrative expenses rose to £32.0 million (2007: £23.5 million). This included
£0.6 million (2007: £0.3 million) in relation
to share based payments, £1.9 million (2007: £2.6 million) of exceptional costs and £0.5
million (2007: £0.5 million) of acquired intangible
asset amortisation. Of the remaining £29.0 million (2007: £20.1 million), £21.1 million or
73% (2007: £15.6 million or 78%) related to
headcount, premises and IT communications related costs. We also expensed over £0.6 million
of legal costs incurred in relation to the legal
challenge which, subject to the successful outcome of cost hearings referred to earlier, may
be recoverable in the future.
Exceptional costs
Certain of the Group's existing borrowings were repaid in June 2007 upon entering into a
£45.0 million senior secured credit agreement
with Morgan Stanley Bank International Limited ("Morgan Stanley") (the "Morgan Stanley
Facility"). An aggregate charge of £0.9 million was
incurred in respect of related professional advisor fees and termination costs associated with
redemption of the repaid borrowings (see note
3).
During the year the Group incurred further administrative expenses of £1.1 million in
launching Accident Management Schemes for newly
acquired referral partners (2007: £1.3 million).
These amounts have been disclosed separately within the financial statements to highlight
the significance of these transactions.
Profit before tax
Profit before tax of £12.1 million was lower than the prior year (2007: £13.6 million)
principally as a result of higher finance costs
associated with the new banking facilities and the costs associated with the Convertible
Notes. Net finance costs rose to £13.0 million from
£6.0 million in 2007 (see note 4). Adjusted profit before tax, which is stated before
amortisation of intangible assets acquired with DCML
and Red Five Vehicle Management Limited ("Red Five"), costs of share based payments, changes
in fair value of derivative financial
liabilities and exceptional items, was £16.1 million (2007: £18.0 million).
Taxation
The effective tax rate for the year was 31.4% (2007: 34.6%) including the effect of the
disallowable nature of the £0.9 million charge
in respect of the change in fair value of the derivative financial liability associated with
the equity conversion option of the Convertible
Notes. The effective rate of tax on adjusted profit before tax was 28.2% (2007: 31.9%). The
reduction in the rate of corporation tax from
30% to 28% took effect from 1 April 2008 and has little effect upon the current tax charge for
the year.
Earnings per share
Basic earnings per share (note 6) were 11.7 pence per share (2007: 13.2 pence per share)
and adjusted earnings per share, which is
stated before amortisation of acquired intangible assets, costs of share based payments,
change in fair value of derivative financial
liability and exceptional costs, were 16.3 pence per share (2007: 18.2 pence per share).
Diluted earnings per share (note 7) were 11.2 pence per share (2007: 13.1 pence per share)
and adjusted diluted earnings per share were
13.8 pence per share (2007: 18.1 pence per share), primarily reflecting the maximum potential
dilutive effect of the Convertible Notes.
Cash Flows
Cash flows from operating activities
From note 14 it can be seen that cash generated from operations for the year was £24.9
million (2007: £20.5 million). The Board measures
internally an adjusted operating cash flow as it considers that all fleet related cash flows
are operating in nature.
The Group's adjusted operating cash flows were as follows:
Adjusted cash generated from operations Year ended Year ended
30 April 30 April
2008 2007
£'m £'m
Profit for the year 8.3 8.9
Depreciation and other non-cash items
Depreciation 23.4 17.7
Amortisation of intangible assets 0.6 0.5
Loss on disposal of vehicles, plant and equipment 1.3 0.6
Share based payments 0.6 0.3
Changes in working capital:
Increase in trade and other receivables (46.7) (36.2)
Decrease / (increase) in claims in progress 0.2 (4.0)
Increase in payables 4.5 10.6
Finance income (0.8) (0.1)
Finance costs 13.8 6.1
Tax 3.8 4.7
Fleet related cash flows (29.1) (20.9)
Adjusted cash outflow from operations (20.1) (11.8)
- after fleet related cash flows
Trade and other receivables increased by £46.7 million (2007: £36.2 million) reflecting
increased trading levels and, in the Board's
view, the detrimental impact of the legal challenge on cash flows, particularly in the first
half of the year, which drove a consequent
increase in debtor days to 227 days (2007: 176 days).
The Board has made several recent announcements about the increase in average cash
collection levels, most recently reporting levels
of £642,000 per working day. Cash collections from the solicitor process in particular
continues to improve and over the last two weeks
average cash collections per working day have increased further to £673,000. The Board is
confident cash collection levels will continue to
rise, not least as a result of the solicitor litigation strategy referred to in detail
elsewhere.
Fleet related cash flows are a material cash flow for the business and are analysed as
follows:
Analysis of fleet related cash flows Year ended Year ended
30 April 30 April
2008 2007
£'m £'m
Proceeds of vehicle disposals 43.9 27.9
VAT recovered on fleet acquisition 15.9 11.4
Capital element of finance lease payments
Deposits (10.2) (7.9)
Monthly repayments (25.2) (16.7)
Balloon repayment at disposal (46.4) (30.6)
Interest element of finance lease payments (7.1) (5.0)
Fleet related cash flows (29.1) (20.9)
Net cash flow from operating activities
Net interest paid of £9.8 million (2007: £5.6 million) included finance lease interest
of £7.1 million, which increased compared to the
prior year (£5.0 million) as a result of growth in fleet volumes. Net bank loan and revolving
credit facility interest increased to £2.7
million (2007: £0.6 million), reflecting significant growth in working capital requirements
as a result of higher levels of trading activity
and the negative impact of the legal challenge on cash receipts from trade receivables.
After corporation tax payments of £3.5 million (2007: £3.9 million) net cash inflow from
operating activities was £11.6 million (2007:
£11.0 million).
Trade receivables and claims in progress
It is important that the nature of our revenue, trade receivables and claims in progress
is understood. IFRS 7 "Financial Instruments
Disclosure" also imposes new disclosure requirements on the Group for the first time this
year.
The Group enters into agreements to provide vehicle rental and accident management
services with 'non-fault' parties to road traffic
accidents. The Group pursues a claim for damages arising from the accident on behalf of the
non-fault party (our client), ordinarily against
the insurer of the driver who was 'at fault' for the accident. As part of our overall service,
and on behalf of our client, the Group may
also recover other losses (e.g. insurance policy excess) sustained by our client. However,
from a revenue and trade receivables or claims in
progress perspective, our focus is on recovering the amount of our vehicle hire charges that
arise from our client's use of our rental
vehicle whilst his/her own car was being repaired.
Credit is provided to our client by us, under an exemption from the Consumer Credit Act,
for a period which expires at the earlier of
364 days or the time at which the claim is settled. After this date no further contracted
credit period is offered by us to our client.However, at the end of the contracted period, we may well offer 'an indulgence' to the client
pending resolution of the claim, a process
which may take longer than 364 days. It should be noted that there is no contractual
relationship between the Group and the insurer of the
at-fault driver; all claims are pursued as damages actionable in tort.
In the normal course of its business, the Group uses two principal methods to conclude
claims directly with the insurer of the
at-fault party. First, negotiation on a claim-by-claim basis takes place between our in-house
settlement team and the at-fault insurer and
then, implemented recently and gradually being applied to all trade receivables, where a claim
fails to settle within 120 days of billing,
claims are passed to a panel of external solicitors who, after instruction from our client,
proceed with the legal process for settlement of
his damages claim. In the first instance, the solicitor will merely reinforce the initial
demand for payment sent by us and then, on
instruction from the client, will issue formal proceedings. The solicitors' reinforcement of
the intent to make a formal claim on behalf of
the client can result in payment from the insurer as can the mere threat or issue of formal
proceedings. More materially, the issue of
formal proceedings starts a process with a court defined time scale, the end point of which is
a court hearing date at which the claim will finally be determined with cash, on successful
outcome, being
received soon thereafter. The client remains responsible for our hire charges irrespective of
the outcome at court, a risk that the client
usually addresses by taking out an insurance policy that we can provide at the outset of the
rental period and against which he can claim if
such circumstances arise.
The robust categorisation and implementation of in-house and solicitor based collection
techniques is at the heart of the Board's
expectation for improvement in the cash flows of the Group in the year ending 30 April 2009
("FY09") and beyond. Considerable claim volumes
have been referred to the solicitor panel recently and over 4,000 in the last two months
alone; a process that will continue in the first
half of the current financial year in order to catch up on the backlog of cases caused by the
legal challenge. The solicitor panel now
stands at 18 firms of solicitors with 6 new firms having joined recently and thereby giving
the Group the required capacity to manage
expected volumes.
As trade receivables carry no "due date" and are stated at their estimated net claim value
after settlement adjustments, trade
receivables are considered neither 'past due' nor 'impaired', these being definitions
contained within IFRS 7 and requiring consideration of
disclosure. The Board reviews debtors internally according to the status of the claim through
the in-house and solicitor processes and, in
particular for claims sent to solicitors, whether they are 'pre issue' or whether proceedings
have formally been issued.
It is the increase in the proportion and magnitude of receivables now categorised as
beyond the 'proceedings issued' status which, by
that definition, have a limited and court defined timescale by which they will, if required,
be heard at court, as compared to a year ago
that gives the Board confidence as to the expected conversion of claims to cash in FY09.
The recent effectiveness of the robust solicitor-led collection strategy is demonstrated
by the increase in receivables that have
progressed beyond the 'proceedings issued' stage which now stands at £26.3 million compared
to £5.4 million a year ago and representing 24%
of total receivables (2007: 8%).
The Board believes that the collection in the current year of those outstanding trade
receivables as at 30 April 2007 was affected
materially by the legal challenge. Of the total £63.8 million receivable as at 30 April 2007
there remained £33.2 million outstanding as at
30 April 2008. The Board is encouraged however by the fact that whilst only £23.7 million of
the £63.8 million (37% of the total) was at
solicitors on 30 April 2007, this stood at £30.2 million (91% of the total still outstanding)
on 30 April 2008, of which £19.1 million is
beyond the proceedings issued stage compared to only £5.4 million a year ago.
The Board believes firmly in the benefits of the ABI GTA to both insurers and credit hire
companies. After the travails of 2007, the
Board also believes that a period of robust and sustained litigation will demonstrate to
insurers that the Group now has the scale, capacity
and intent to use established law to ensure insurers pay the Group's valid claims. The Board
is intent on pursuing this strategy but equally
will work actively with insurers to assist them in whatever way it can (given the limitations
most of them have in handling the consequent
claim volumes) in situations where we perceive insurers have genuine intent to remit payment
under the ABI GTA and thereby avoid the
material additional legal costs they have to pay after our claim starts to incur legal costs
of collection.
Further information on trade receivables is given in Note 10.
Investing activities
During the year, 2,830 vehicles were sold with net proceeds of £43.9 million (2007: 1,819
vehicles sold with net proceeds of £27.9
million). Other capital expenditure of £2.0 million (2007: £4.0 million) was incurred
primarily on IT investment in relation to headcount
expansion and the completion of infrastructure improvements at the Group's head office.
Financing and net debt
Total net debt was £149.0 million (2007: £96.6 million) reflecting an increase in
vehicle finance lease obligations to £97.3 million
(2007: £77.0 million), the Convertible Notes of £50.0 million (2007: £nil), other bank
loans of £2.2 million (2007: £6.5 million), working
capital facilities drawn down of £30.0 million (2007: £20.0 million) and cash at bank of
£27.0 million (2007: £6.9 million) and after
deducting (i) unamortised debt issue costs of £4.6 million (2007: £nil) and (ii) £0.6
million attributed to the equity conversion option of
the Convertible Notes classified as a derivative financial liability and adding in accrued
interest on the Convertible Notes of £1.7 million
(2007: £nil).
Working capital facilities
In June 2007 we announced the refinancing and expansion of the working capital facilities
available to the Group with the Morgan Stanley
Facility. This facility was used, inter alia, to repay an aggregate of £24.4 million in
relation to a revolving credit facility and a six
year term loan from the Group's previous bankers and to provide additional working capital
facilities.
As at 30 April 2008, £30.0 million of the Morgan Stanley Facility was drawn down and cash
at bank was £27.0 million. A further £10.0
million revolving credit facility was also available for draw down under the Morgan Stanley
Facility giving the Group total headroom against
bank facilities as at 30 April 2008 of £37.0 million.
Our net bank debt (excluding finance lease obligations and the Convertible Notes, and
after offset of debt issue costs) was £4.0 million
(2007: £19.6 million), which includes a £2.2 million loan in connection with infrastructure
improvements at the Group's head office (2007:
£2.1 million).
Convertible Notes
On 8 January 2008 the Group announced that it had completed the issue of the Convertible
Notes, the net proceeds of which were £46.6
million after associated expenses of £3.4 million. From these net proceeds, £5.0 million of
the Morgan Stanley Facility was repaid and the
remaining £41.6 million is being used to provide additional working capital funding and to
support the projected growth of the Group.
Finance lease obligations
Finance lease obligations rose from £77.0 million as at 30 April 2007 to £97.3 million
as at 30 April 2008, reflecting £101.9 million of
new debt for fleet replacement and expansion (2007: £77.8 million) net of capital repayments
of £81.8 million (2007: £55.2 million).
Debt maturity
The Morgan Stanley Facility is not repayable until September 2010 and the Convertible
Notes, if not converted, not until January 2013.This gives substantial time to consider the renewal, if required, of these facilities.
The Group's finance leases are taken out on a vehicle by vehicle basis with a 10% deposit
and a 50% final payment, the latter of which
is financed primarily by receipt of vehicle sale proceeds. The balance of 40% is repaid
monthly over, typically, 24 months.
Dividends
Dividends of £1.8 million (2007: £2.4 million) were paid during the year, consisting of
the final dividend for 2007 of 1.5 pence per
share declared on 16 July 2007 and paid on 2 October 2007, and the interim dividend for 2008
of 1.0 pence per share declared on 8 January
2008 and paid on 15 February 2008. The Board has proposed a final dividend for 2008 of 1.5
pence per share.
Other balance sheet items
Capital expenditure of £86.9 million (2007: £69.0 million) related principally to growth
in the vehicle fleet with 3,924 vehicles
acquired under VAT inclusive finance lease arrangements at a capital (VAT exclusive) cost of
£85.3 million (2007: £65.2 million).
Claims in progress of £16.2 million (2007: £16.4 million) reflects both the growth in
the business and a shortening of the time taken to
invoice closed claims such that the number of days' sales represented by claims in progress
reduced from 60 days as at 30 April 2007 to 45
days at 30 April 2008.
Our people
In addition to the Chairman's comments, our thanks go to each and every employee of
Accident Exchange for their outstanding commitment
over the past year. Despite the distractions, the business has continued to move forward. This
would not have been possible without the
efforts of everyone.
Looking ahead
The Board retains a strong focus on the task of margin improvement, maintaining revenue
growth following the difficult trading
conditions for the Group in 2007 and, primarily, on continuing to improve cash flows. In the
short time since the issue of the Convertible
Notes in January 2008, good progress has been made on many fronts and the Board is optimistic
that the performance indicators will continue
to improve. January 2008 was a key milestone for the Group, releasing management to dedicate
its energy to normal business activities
following the uncertainty surrounding the business during 2007 and to benefit from the
operational process improvements instigated in the
last quarter of the financial year.
Steve Evans Martin Andrews
Chief Executive Group Finance Director
30 June 2008 30 June 2008
Consolidated Income Statement
For the year ended 30 April 2008
Year ended Year ended
30 April 30 April
2008 2007
Note £'m
£'m
Revenue 2 165.1 116.9
Cost of sales (108.0) (73.8)
Gross profit 57.1 43.1
Administrative expenses (32.0) (23.5)
Operating profit 25.1 19.6
Finance income 4 0.8 0.1
Finance costs 4 (13.8) (6.1)
Profit before tax analysed between:
Profit before tax before amortisation of acquired intangible 16.1 18.0
assets, cost of share based payments, change in fair value
of derivative financial liability and exceptional costs
Amortisation of acquired intangible assets (0.5) (0.5)
Share based payments (0.6) (0.3)
Change in fair value of derivative 12 (0.9) -
financial liability
Exceptional costs 3 (2.0) (3.6)
Profit before tax 12.1 13.6
Taxation 5 (3.8) (4.7)
Profit for the year 8.3 8.9
Earnings per share
Basic 6 11.7p 13.2p
Diluted 7 11.2p 13.1p
All results are attributable to continuing operations.
The Directors recommend a final dividend of 1.5 pence per share for the year ended 30
April 2008 (2007: 1.5 pence per share). Combined
with the interim dividend of 1.0 pence (2007: 1.5 pence) per share paid on 15 February 2008,
this results in a total dividend of 2.5 pence
per share for the year ended 30 April 2008 (2007: 3.0 pence).
Consolidated Balance Sheet
At 30 April 2008
30 April 30 April
2008 2007
Note £'m £'m
Assets
Non-current assets
Property, plant and equipment 9 93.7 73.9
Goodwill 21.5 21.5
Other intangible assets 3.2 3.4
118.4 98.8
Current assets
Claims in progress 16.2 16.4
Trade and other receivables 10 113.7 66.9
Cash and cash equivalents 16 27.0 6.9
156.9 90.2
Non-current assets held for sale 0.3 1.4
157.2 91.6
Total assets 275.6 190.4
Liabilities
Current liabilities
Financial liabilities - borrowings 11 (39.0) (60.5)
Trade and other payables 13 (19.2) (15.5)
Current tax liabilities (2.6) (2.0)
(60.8) (78.0)
Net current assets 96.4 13.6
Non-current liabilities
Financial liabilities - borrowings 11 (137.0) (43.0)
Derivative financial liabilities 12 (1.5) -
Deferred tax liabilities (4.5) (4.7)
(143.0) (47.7)
Total liabilities (203.8) (125.7)
Net assets 71.8 64.7
Shareholders' equity
Share capital 3.6 3.6
Share premium 26.2 26.2
Other reserves 11.5 11.5
Retained earnings 30.5 23.4
Total shareholders' equity 71.8 64.7
Consolidated Cash Flow Statement
For the year ended 30 April 2008
Year ended Year ended
30 April 30 April
2008 2007
Note £'m £'m
Cash flows from operating activities
Cash generated from operations 14 24.9 20.5
Finance income received 0.6 0.1
Finance costs on bank loans (3.3) (0.7)
Finance cost element of finance lease payments (7.1) (5.0)
Taxation paid (3.5) (3.9)
Net cash inflow from operating activities 11.6 11.0
Cash flows from investing activities
Purchase of property, plant and equipment (1.9) (3.7)
Purchase of intangible assets (0.1) (0.3)
Proceeds from sale of property - 1.9
Proceeds from sale of vehicles, plant and 43.9 27.9
equipment
Acquisition of subsidiary, net of cash acquired (0.2) (4.8)
Net cash inflow from investing activities 41.7 21.0
Cash flows from financing activities
Proceeds from issue of Convertible Notes 11 50.0 -
Convertible Notes issue costs 11 (3.4) -
Proceeds from issue of ordinary share capital - 13.0
Share issue costs - (0.5)
Proceeds from borrowings 15 33.9 27.1
Repayment of borrowings 15 (30.1) (0.6)
Capital element of finance lease payments 15 (81.8) (55.2)
Dividends paid (1.8) (2.4)
Net cash used in financing activities (33.2) (18.6)
Net increase in cash and cash equivalents 20.1 13.4
Cash and cash equivalents / (overdraft) at 6.9 (6.5)
beginning of the year
Cash and cash equivalents at end of the year 16 27.0 6.9
Consolidated Statement of Changes in Equity
For the year ended 30 April 2008
Share Share Other Retained Total
capit premi reser earnings
al um ves
£'m £'m £'m £'m £'m
At 1 May 2006 3.9 8.0 10.9 16.6 39.4
Total recognised income and expense - - - 8.9 8.9
Equity settled share based payments - - - 0.3 0.3
Issue of shares 0.3 18.2 - - 18.5
Purchase of own shares (0.6) - 0.6 - -
Dividends paid - - - (2.4) (2.4)
At 30 April 2007 3.6 26.2 11.5 23.4 64.7
Total recognised income and expense - - - 8.3 8.3
Equity settled share based payments - - 0.6 0.6
Dividends paid (note 8) - - - (1.8) (1.8)
At 30 April 2008 3.6 26.2 11.5 30.5 71.8
Notes to the Final Results Announcement
For the year ended 30 April 2008
1. Basis of Preparation
The financial statements have been prepared in accordance with IFRS and International
Financial Reporting Interpretations Committee
("IFRIC") interpretations that have been adopted by the European Union, and with those parts
of the Companies Act 1985 applicable to those
companies reporting under IFRS.
The financial information set out in this preliminary announcement has been prepared under
the historical cost convention, except for
the costs of share based payments and derivative financial liabilities, which are stated at
fair value. The consolidated financial
information is presented in pounds sterling and all values are rounded to the nearest £0.1
million unless otherwise indicated.
The principal accounting policies of the Group are set out in the Group's 2008 annual
report which will be sent to shareholders in due
course and which will be available from the investor relations section of the Group's website
www.accidentexchange.com.
2. Revenue
An analysis of the Group's revenue is as follows:
Year ended Year ended
30 April 30 April
2008 2007
£'m £'m
Delivery of accident management and related services 124.8 88.1
Credit repair 40.3 28.8
165.1 116.9
Revenue derived from the delivery of accident management and related services, primarily
credit hire of vehicles, includes £3.2 million
(2007: £2.8 million) from DCML Limited, which was acquired on 5 May 2006.
3. Exceptional costs
Year ended Year ended
30 April 30 April
2008 2007
£'m £'m
Accident Management Scheme launch costs 1.1 1.3
Refinancing costs 0.9 0.5
Exceptional settlement discount - 1.0
Costs relating to admission to the Official List - 0.8
2.0 3.6
During the year the Group incurred administrative expenses of £1.1 million (2007: £1.3
million) launching Accident Management Schemes
for and on behalf of newly acquired referring dealer and manufacturer partners. Due to the
significant magnitude of this investment both in
the current and prior year, which is expected to drive revenues in future periods, the costs
have been disclosed as exceptional items.
On 15 June 2007 the Group announced that it had entered into a £45.0 million senior
secured credit agreement with Morgan Stanley and as
a result, certain of the Group's borrowings were redeemed. A charge in aggregate of £0.9
million (2007: £0.5 million) has been made in
connection with this redemption, consisting of professional adviser fees of £0.8 million
(2007: £0.3 million) and accelerated amortisation
of the issue costs associated with raising these previous banking facilities of £nil (2007:
£0.2 million) (both charged to administrative
expenses) and £0.1 million (2007: £nil) of termination costs imposed by the terms and
conditions of those facilities (charged to finance
costs). Details of the new borrowing facilities are set out in note 11.
During the prior year, as a result of a legal challenge as to the enforceability of
certain of the Group's historical rental agreements,
certain insurers departed from their previously established payment profiles. Whilst a number
of leading insurers advised that they were not
pursuing these arguments the Group found it necessary to concede a significantly enhanced
settlement discount in order to crystallise a
material settlement receipt from one insurer in March 2007. This concession was made at a time
of considerable uncertainty as regards the
legal challenge and at a time of maximum utilisation of the then financing facilities
available to the Group, facilities which were
strengthened materially during the year ended 30 April 2008 (see note 11).
The Group incurred £0.8 million of exceptional administrative expenses during the prior
period in connection with its application and
subsequent transfer from AIM to the Official List of the London Stock Exchange.
4. Finance income and costs
Year ended Year ended
30 April 30 April
2008 2007
£'m £'m
Finance income
Interest income on bank balances 0.8 0.1
Finance costs
Bank borrowings (4.1) (1.1)
Obligations under finance leases (7.1) (5.0)
Convertible Notes (1.7) -
Fair value adjustment on derivative financial (0.9) -
liabilities
Total finance costs (13.8) (6.1)
Net finance costs (13.0) (6.0)
The finance costs of the Convertible Notes of £1.7 million (2007: £nil) includes a
charge of £0.9 million (2007: £nil) in respect of the
5.50% coupon payable twice yearly and £0.8 million (2007: £nil) in aggregate in respect of
accreted interest, amortisation of issue costs
and amortisation of the value attributed to the equity conversion component at inception,
which has been separately recognised as a
derivative financial liability.
5. Taxation
The standard rate of corporation tax in the UK reduced during the financial year from 30%
to 28% with effect from 1 April 2008. As a
result, the average standard rate of corporation tax applicable to the Group for the year was
29.8% (2007: 30%). The tax charge for the year
is higher (2007: higher) than the average standard rate of corporation tax as explained
below:
Year ended Year ended
30 April 30 April
2008 2007
£'m £'m
Profit before tax 12.1 13.6
Profit before tax multiplied by the rate of 3.6 4.0
corporation tax in the UK of 29.8% (2007: 30.0%)
Effect of:
Expenses not deductible for tax purposes 0.6 0.6
Adjustments in respect of prior years (0.4) -
Deferred tax on share based payment charges - 0.1
Tax on profit on ordinary activities 3.8 4.7
6. Basic earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary
shareholders by the weighted average number of
shares in issue during the year. Details of the earnings and weighted average number of
ordinary shares used in the calculations are set out
below:
Year ended Year ended
30 April 30 April
2008 2007
Earnings attributable to ordinary shareholders (£'m) 8.3 8.9
Weighted average number of ordinary shares 71,138,544 67,468,086
Basic earnings per share (pence) 11.7 13.2
Adjusted basic earnings per share
To understand the underlying trading performance, the Directors consider it appropriate to
disclose basic earnings per share before
amortisation of acquired intangible assets, the costs of share based payments, the change in
fair value of the derivative financial
liability in relation to the Convertible Notes and exceptional costs. The calculation of
adjusted earnings per share is set out below:
Year ended Year ended
30 April 30 April
2008 2007
Earnings attributable to ordinary shareholders (£'m) 8.3 8.9
Post-tax amortisation of acquired intangible assets 0.4 0.4
(£'m)
Post-tax cost of share based payments (£'m) 0.6 0.3
Post-tax cost of change in fair value of derivative 0.9 -
financial liability (£'m)
Post-tax cost of exceptional items (£'m) 1.4 2.7
Adjusted profit on ordinary activities after taxation 11.6 12.3
(£'m)
Weighted average number of ordinary shares 71,138,544 67,468,086
Basic earnings per share (pence) 11.7 13.2
Amortisation of acquired intangible fixed assets 0.6 0.6
(pence)
Cost of share based payments (pence) 0.8 0.4
Change in fair value of derivative financial 1.2 -
liability (pence)
Cost of exceptional items (pence) 2.0 4.0
Adjusted basic earnings per share (pence) 16.3 18.2
7. Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of
all dilutive potential ordinary shares. The Company has three sources of dilutive potential
ordinary shares, namely the Convertible Notes,
share options and the Morgan Stanley Warrant.
The Convertible Notes had an initial conversion price of 107.7 pence per ordinary share.The conversion price is subject to adjustment
in certain circumstances including (i) adjustments to reflect any dividends paid; and (ii) if
and to the extent that the average volume
weighted average price of the ordinary shares over the 15 dealing days prior to 9 January 2009
is less than 89.8 pence per share (subject to
previous conversion price adjustments), provided that in this circumstance the conversion
price shall not be reduced below 75.4 pence per
share.
For the purposes of the fully diluted weighted average number of shares, the Group is
required to assume that the Convertible Notes are
convertible at a price of 75.4 pence per ordinary share, which would result in the issue of
66.3 million shares. As the Convertible Notes
were issued on 8 January 2008 the time apportioned adjustment to the weighted average number
of shares for the current year is 20.7 million.The Group's earnings have been adjusted for the post-tax finance costs associated with the
Convertible Notes.
For the share options and Morgan Stanley Warrant the number of potential dilutive shares
represents the number of ordinary shares that
would be issued upon their exercise, net of the number of ordinary shares that could have been
acquired at fair value by the Company based
on the monetary value of their subscription rights. Fair value is determined as the average
market price of the Company's shares during the
year. The share options and Morgan Stanley Warrant are only assumed to be potentially dilutive
to the extent that they were 'in the money'
by reference to the average market value of the Company's ordinary shares during the year.
Details of the earnings and weighted average number of potential ordinary shares used in
the calculations are set out below:
Year ended Year ended
30 April 30 April
2008 2007
Earnings attributable to ordinary shareholders (£'m) 8.3 8.9
Post-tax finance costs of Convertible Notes (£'m) 2.1 -
Earnings used to determine diluted earnings per share 10.4 8.9
(£'m)
Weighted average number of potential ordinary shares 92,976,552 67,731,280
- diluted
Diluted earnings per share (pence) 11.2 13.1
Adjusted diluted earnings per share
The calculation of adjusted diluted earnings per share is set out below assuming the same
adjustments as shown in note 6 except for the
post-tax cost of the change in fair value of the derivative financial liability, which is
taken into account in the earnings used to
determine diluted earnings per share above.
Year ended Year ended
30 April 30 April
2008 2007
Earnings used to determine diluted earnings per share 10.4 8.9
(£'m)
Post-tax amortisation of acquired intangible assets 0.4 0.4
(£'m)
Post-tax cost of share based payments (£'m) 0.6 0.3
Post-tax cost of exceptional items (£'m) 1.4 2.7
Adjusted profit on ordinary activities after taxation 12.8 12.3
(£'m)
Weighted average number of potential ordinary shares 92,976,552 67,731,280
- diluted
Diluted earnings per share (pence) 11.2 13.1
Amortisation of acquired intangible fixed assets 0.5 0.6
(pence)
Cost of share based payments (pence) 0.6 0.4
Cost of exceptional items (pence) 1.5 4.0
Adjusted diluted earnings per share (pence) 13.8 18.1
8. Equity dividends
The Directors recommend a final dividend of 1.5 pence per share for the year ended 30
April 2008 (2007: 1.5 pence per share). Combined
with the interim dividend of 1.0 pence per share (2007: 1.5 pence per share) paid on 15
February 2008, this results in a total dividend of
2.5 pence per share for the year ended 30 April 2008 (2007: 3.0 pence per share). If approved
at the AGM, payment will be made on 9
September 2008 to shareholders on the register on 15 August 2008. The shares will go
'ex-dividend' on 13 August 2008.
9. Property, plant & equipment
Leasehold Computer Fixtures Motor Total
property equipmen and vehicl
and t fittings es
improveme
nts
£'m £'m £'m £'m £'m
Cost
At 1 May 2006 - 1.0 0.7 53.4 55.1
Additions 1.9 1.0 0.9 65.2 69.0
Additions through business 0.2 - - 0.2 0.4
combinations
Transfer to assets held for - - - (1.8) (1.8)
sale
Disposals - (0.2) - (34.6) (34.8)
At 30 April 2007 2.1 1.8 1.6 82.4 87.9
Additions 0.3 1.0 0.3 85.3 86.9
Additions through business - - - 0.2 0.2
combinations
Transfer to assets held for - - - (0.5) (0.5)
sale
Disposals - (0.1) - (62.7) (62.8)
At 30 April 2008 2.4 2.7 1.9 104.7 111.7
Depreciation
At 1 May 2006 - 0.2 0.1 5.3 5.6
Charge for the year 0.1 0.5 0.3 16.8 17.7
Transfer to assets held for - - - (0.4) (0.4)
sale
Disposals - (0.1) - (8.8) (8.9)
At 30 April 2007 0.1 0.6 0.4 12.9 14.0
Charge for the year 0.2 0.8 0.4 22.0 23.4
Transfer to assets held for - - - (0.2) (0.2)
sale
Disposals - - - (19.2) (19.2)
At 30 April 2008 0.3 1.4 0.8 15.5 18.0
Net book value
At 30 April 2008 2.1 1.3 1.1 89.2 93.7
At 30 April 2007 2.0 1.2 1.2 69.5 73.9
10. Trade and other receivables
30 April 30 April
2008 2007
£'m £'m
Trade receivables 110.9 63.8
Value added tax - 0.3
Other receivables 0.4 0.3
Prepayments and accrued income 2.4 2.5
113.7 66.9
Trade receivables represent amounts receivable for the provision of services to customers.The expected adjustments arising on the
settlement of receivables represents a critical judgement made by the Directors. The Directors
have estimated the value of trade receivables
to reflect the expected settlement amounts receivable on the basis of the prior experience of
collection levels and anticipated collection
profiles.
11. Financial liabilities
Borrowings
Details of borrowings are as follows:
30 April 30 April
2008 2007
£'m £'m
Current
Revolving credit facility - 20.0
Bank loans 0.5 6.5
Finance lease obligations 38.5 34.0
39.0 60.5
Non-current
Bank loans 30.5 -
Finance lease obligations 58.8 43.0
Convertible Notes 47.7 -
137.0 43.0
Total borrowings 176.0 103.5
Revolving credit facility and bank loans
On 15 June 2007 the Group announced that it had entered into a senior secured credit
agreement with Morgan Stanley Bank International
Limited in respect of banking facilities of up to £45.0 million ("Facility"). The Facility
replaced a revolving credit facility of £20.0
million and bank loans of £4.4 million with the Group's previous financiers.
The Facility, which matures on 30 September 2010, comprised aggregate term loans of £35.0
million and a £10.0 million revolving credit
facility. The interest rate commenced at LIBOR plus 3% and will rise to LIBOR plus 4% on 1
July 2008 and to LIBOR plus 5% on 1 January 2009.The Facility is secured by a fixed and floating charge over certain of the Group's assets.
A term loan of £5.0 million drawn down under this Facility during the year was repaid in
January 2008 following the issue of the
Convertible Notes as a result of which the aggregate Facility available to the Group was
reduced to £40.0 million.
Bank loans of £31.0 million as at 30 April 2008 comprise term loans of £30.0 million
drawn down from the Facility and a £2.2 million
five year term loan in relation to leasehold property improvements at the Group's Alpha 1
headquarters, which are stated net of aggregate
unamortised issue costs of £1.2 million (£0.7 million was amortised during the year through
finance costs).
Convertible Notes
On 8 January 2008 the Group announced the issue of £50.0 million 5.50% convertible notes
due 2013. Morgan Stanley & Co International plc
acted as lead manager for the offering, the proceeds to the Group of which were £46.6 million
net of associated expenses of £3.4 million.
The Convertible Notes constitute senior, unsubordinated, direct, unconditional and
unsecured obligations of the Company, carry a cash
payable coupon of 5.50% payable semi-annually in arrears on 8 July and 8 January commencing on
8 July 2008, and had an initial conversion
price of 107.7 pence per ordinary share (which represented a 20% premium above the reference
price of 89.8 pence per share which was set at
the time of announcing the intention to issue the Convertible Notes). Holders of the
Convertible Notes may convert the Convertible Notes
into ordinary shares at the then prevailing conversion price at any time until the date
falling 14 days prior to 8 January 2013.
The conversion price is subject to adjustment in certain circumstances including (i)
adjustments to reflect any dividends paid; and (ii)
an adjustment to the extent that the average volume weighted average prices of the ordinary
shares over the 15 dealing days prior to 9
January 2009 is less than 89.8 pence per share (subject to previous conversion price
adjustments), subject to a floor of 75.4 pence per
share.
The conversion price has been adjusted to 106.0 pence per ordinary share following payment
of the 1.0 pence per share interim dividend
paid on 15 February 2008. Subject to shareholder approval at the Annual General Meeting on 6
August 2008, a further price adjustment will
arise (currently expected to be approximately 1.5 pence per share) on 9 September 2008 on
payment of the proposed final dividend (see note
8).
To the extent the Convertible Notes have not previously been converted, purchased and
cancelled or redeemed, the Company will redeem the
Convertible Notes on 8 January 2013 in cash at their accreted principal amount reflecting an
overall yield to maturity of 9.75% (whereby for
every £50,000 principal amount then still outstanding £63,286 will be payable in cash).
The values of the liability component and equity conversion option component were
determined as at the date of issue of the Convertible
Notes. The fair value of the liability component, which is disclosed separately on the balance
sheet within non-current liabilities, was
calculated using a market interest rate for an equivalent non-convertible instrument. The
remaining amount, representing the value of the
equity conversion option, is classified as a derivative financial liability in non-current
borrowings.
The amount recognised in the balance sheet in relation to the Convertible Notes is as
follows:
30 April 30 April
2008 2007
£'m £'m
Face value of Convertible Notes issued on 8 January 2008 50.0 -
Equity conversion option component recognised at issue (0.6) -
Issue costs (3.4) -
Liability component on initial recognition at 8 January 46.0 -
2008
Finance charges (note 4) 1.7 -
Liability component at 30 April 2008 47.7 -
12. Derivative financial liabilities
Details of derivative financial liabilities are as follows:
30 April 30 April
2008 2007
£'m £'m
Recognised upon issue of Convertible Notes 0.6 -
Movement in fair value during the year 0.9 -
At 30 April 1.5 -
13. Trade and other payables
30 April 30 April
2008 2007
£'m £'m
Trade payables 12.5 10.6
Social security and other taxes 2.3 2.3
Non-trade payables 2.3 1.1
Accrued expenses 2.1 1.5
19.2 15.5
14. Cash generated from operations
Reconciliation of net profit to cash generated from operations:
Year Year
ended ended
30 April 30 April
2008 2007
£'m £'m
Profit for the year 8.3 8.9
Depreciation and other non-cash items:
Depreciation 23.4 17.7
Amortisation of intangible assets 0.6 0.5
Loss on disposal of vehicles, plant and equipment 1.3 0.6
Share based payments 0.6 0.3
Changes in working capital:
Increase in trade and other receivables (46.7) (36.2)
Decrease / (increase) in claims in progress 0.2 (4.0)
Increase in payables 4.5 10.6
VAT recovered on fleet additions 15.9 11.4
Finance income (0.8) (0.1)
Finance costs 13.8 6.1
Tax 3.8 4.7
Cash generated from operations 24.9 20.5
15. Reconciliation of cash and cash equivalents to net borrowings
Year Year
Ended ended
30 April 30 April
2008 2007
£'m £'m
Increase in cash and cash equivalents in the period 20.1 13.4
Capital element of finance lease payments 81.8 55.2
Proceeds from issue of Convertible Notes net of issue (46.6) -
costs
Proceeds from borrowings (33.9) (27.1)
Repayment of borrowings 30.1 0.6
Decrease in net borrowings resulting from cash flows 51.5 42.1
Inception of finance leases (101.9) (77.8)
Convertible Notes interest accrued included in net debt (1.7) -
Derivative financial liability excluded from net debt 0.6 -
Amortisation of debt issue costs (0.7) -
Borrowings acquired with subsidiary (0.2) (0.2)
Increase in net borrowings during the period (52.4) (35.9)
Net borrowings at 1 May (96.6) (60.7)
Net borrowings at 30 April (149.0) (96.6)
16. Analysis of movement in net borrowings
As at As at
1 May Non-cash 30 April
2007 Cash flows Acquisition items 2008
£'m £'m £'m £'m £'m
Cash and cash equivalents 6.9 20.1 - - 27.0
Revolving credit facility (20.0) 20.0 - - -
Other bank loans (6.5) (23.8) - (0.7) (31.0)
Finance leases (77.0) 81.8 (0.2) (101.9) (97.3)
Convertible Notes - (46.6) - (1.1) (47.7)
Net borrowings (96.6) 51.5 (0.2) (103.7) (149.0)
17. Other information
These results for the year ended 30 April 2008 together with the corresponding amounts for
the year ended 30 April 2007 are extracts
from the Group's Annual Report and Accounts and do not constitute statutory accounts within
the meaning of section 240 of the Companies Act
1985 (as amended).
The Group's Annual Report and Accounts for the year ended 30 April 2008, on which the
auditors have issued a report that does not
contain a statement under section 237(2) or (3) of the Companies Act 1985, will be posted to
shareholders in due course and delivered to the
Registrar of Companies in due course. Copies will be available from Company Secretary, Alpha
1, Canton Lane, Hams Hall, Birmingham, B46 1GA
or from the Group's website www.accidentexchange.com.
The Annual General Meeting will be held at the offices of DLA Piper (UK) LLP, Victoria
Square House, Victoria Square, Birmingham, B2 4DL
at 11 am on Wednesday 6 August 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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