TIDMACE
RNS Number : 4423W
Accident Exchange Group PLC
29 July 2009
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| FOR IMMEDIATE RELEASE | 29 July 2009 |
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Accident Exchange Group Plc
RESULTS FOR THE YEAR ENDED 30 APRIL 2009
Accident Exchange Group Plc ("Accident Exchange", the "Group" or the "Company")
announces its audited results for the year ended 30 April 2009.
Key points
Financial
* Adjusted* revenue: GBP167.0 million (2008: GBP161.9 million).
* Adjusted* gross margin: 35.1% (2008: 31.9%).
* Adjusted* profit before tax: GBP13.3 million (2008: GBP13.9 million).
* Net exceptional costs and other items: GBP68.7 million (2008: GBP4.0 million).
* Reported revenue: GBP132.0 million (2008: GBP161.9 million).
* Reported loss before tax: GBP55.4 million (2008: profit of GBP9.9 million).
* Cash at bank and working capital headroom against bank facilities:
GBP17.2 million.(2008: GBP37.0 million).
* Total net debt: GBP149.8 million (2008: GBP149.0 million).
* Adjusted cash outflow from operations - after fleet related cash flows - reduced
to GBP13.7m (2008: GBP20.1m)
* No final dividend is recommended (2008: 1.5p).
* Adjusted revenue, adjusted gross profit, adjusted gross margin, adjusted
operating profit and adjusted profit before tax are all stated before
amortisation of acquired intangible assets, cost of share based payments, change
in fair value of derivative financial liability and exceptional items.
Operational
* Implemented cost reduction programmes to balance the size of the business with
the Group's expected share of a temporarily contracted market.
* Reduced our total fleet by 18% to 4,865 vehicles (2008: 5,935 vehicles);
composition adjusted to match current rental day mix.
* Eliminated more than GBP40.0 million of future fleet purchase commitments.
* Implemented 2.75% increase to the ABI GTA tariff with effect from 1 July 2009.
* Continued to drive a robust strategy of pursuing claims through litigation where
insurers fail to settle existing claims within the terms of the ABI General
Terms of Agreement.
* Increased cash collections by 18% to GBP157.2 million (2008: GBP133.0 million)
in spite of the significant illiquidity issues faced by insurers as a result of
the credit crunch.
* Supplied rental vehicles to 38,500 customers (2008: 41,000 customers).
* Recorded 1.1 million rental days (2008: 1.1 million).
* Contracted with a prestige automotive manufacturer to launch a unique 'non
credit hire' insurance based mobility proposition to all of their new car
customers from 1 October 2009.
* Effected renewal of top four largest automotive dealer referral contracts in the
period.
On outlook, David Galloway, Non-Executive Chairman, stated:
"The difficulties in the domestic and global economy in general and the
automotive and banking markets in particular made this a challenging year.
Nevertheless, rental day activity to date in the new financial year is holding
up well with new account wins compensating so far for the seasonal reduction in
volumes normally seen at this time of year.
"After the strenuous efforts to realign the rental fleet to current market
conditions, it is encouraging to see that the rental fleet utilisation had
improved to 61.8% by the end of the year (58.5% for the year to 30 April 2009)
and has improved further to 66.7% today on a revenue basis and 81.5% on a units
basis, a level that we have not seen for some years.
"Our primary objective and biggest challenge continues to be the improvement in
cash collections and the achievement of cash flow break-even as soon as
possible."
CONTACTS:
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| Accident Exchange Group Plc | |
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| Steve Evans, Chief Executive | Today: 020-7367-8888; thereafter |
| | 08703-009 781 |
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| Martin Andrews, Group Finance | Today: 020-7367-8888; thereafter |
| Director | 08703-009 781 |
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| | |
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| Singer Capital Markets Limited | 020-3205-7500 |
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| Shaun Dobson, Joint Head of | |
| Corporate Finance | |
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| | |
+-----------------------------------+------------------------------------------+
| Bankside | |
+-----------------------------------+------------------------------------------+
| Steve Liebmann or Simon | 020-7367-8888 |
| Bloomfield | |
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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.
Cautionary Statement
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, and businesses of Accident Exchange
Group Plc. These statements and forecasts involve risk, uncertainty and
assumptions because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors which could cause actual
results or developments to differ materially from those expressed or implied by
these forward-looking statements. These forward-looking statements are made only
as at the date of this announcement. Nothing in this announcement should be
construed as a profit forecast. Except as required by law, Accident Exchange
Group Plc has no obligation to update the forward-looking statements or to
correct any inaccuracies therein.
CHAIRMAN'S STATEMENT
Introduction
The sudden and sharp deterioration in the UK economy is well understood. For the
Group, the decline in motor dealership activity levels, the reduction in
motoring journeys and associated accident rates, together with the illiquidity
issues faced by some UK banks and insurers, combined to make a very difficult
and challenging environment for the Group, particularly during the second half
of the year. These events have had both operational and financial effects.
Operationally, as the UK economy contracted from last Summer, the number of
driven miles decreased, particularly for prestige models, with a consequent
reduction in accident volumes. In turn, this resulted in greater available
capacity within the UK vehicle repair network which shortened repair times and
reduced rental lengths and revenue.
Against this backdrop, and whilst a significant pre tax loss has been reported
for the year, full year rental day volumes and revenues* were maintained in line
with last year with underlying trading* being conducted profitably* (*stated
before exceptional and other items as per note 4 and as narrated below).
Financially, the weakness in the retail automotive market from the autumn
onwards adversely affected trade and consumer demand for used vehicles leading
to a substantial reduction in used vehicle prices and the GBP19.6 million
exceptional fleet impairment already charged in the results for the first half
of the year as narrated below. Furthermore, cash collection from insurers became
more difficult in the second half of the year as they suffered from both
illiquidity and headcount reductions as a result of the 'credit crunch' and
falling investment returns on their cash balances and this has catalysed a
GBP44.2 million exceptional charge in the second half of the year (see narrative
below).
Responding to these broader economic issues we acted rapidly in implementing a
series of measures to reduce costs and capital investment in order to balance
the size of the business with the Group's expected share of a temporarily
contracted market. The impact of the recession on insurer behaviour, and on
claim settlement activity particularly, has also led us to revise our strategy
to improve cash collections.
Fleet, Fleet Impairment and fleet finance facilities
The Group's business model is built on strong relationships with automotive
manufacturers and their motor dealers who refer their non fault accident
customers to us. In return we pay referral fees, we repatriate the damaged
vehicle to them for repair and, in certain instances, we make commitments to
purchase certain volumes of new cars, not least so we can replace our existing
fleet as it ages to its normal disposal date.
During H1 referral volumes started to fall short of our then continued growth
expectations and it became apparent that not all of these fleet commitments
would be needed. Consequently we introduced an initiative to motor dealers to
swap the purchase of certain new cars for one-off commission payments. This
initiative was well received by dealers and the GBP4.2 million related cash
outflow made in H2 facilitated the avoidance of c. GBP40.0 million in future
fleet additions, thus saving interest, depreciation and maintenance costs
estimated to be in excess of GBP10.0 million per annum. As a result of this and
other concerted efforts to reduce the fleet, capital spend on new vehicles
reduced by 48% to GBP44.6 million (2008: GBP85.3 million) and the total fleet
has been reduced by 18% to 4,865 vehicles as at 30 April 2009 (30 April 2008:
5,935). Full details of the reduction in fleet size are included below in the
Business and Financial Review. Total outstanding fleet purchase commitments as
at 30 April 2009 have also fallen by 70% to GBP30.3 million (2008: GBP101.4
million) as a result of these initiatives and finance lease debt (note 18) has
reduced by 22% to GBP75.5 million (2008: GBP97.3 million).
However, we were unable to influence the rapid and considerable reduction in
fleet residual values caused by the recession and particularly in the period to
December 2008. This was reflected in a GBP19.6 million exceptional impairment
charge ("Fleet Impairment") made against the carrying value of our fleet in the
results for the first half of the year (2008: GBPnil). Whilst the used vehicle
market has improved since December 2008, enabling the Group to dispose of
vehicles in volumes and at prices slightly ahead of expectations, there still
remains considerable uncertainty over the speed with which the UK economy will
recover from the current recession and the future direction of the used vehicle
market and prices: accordingly none of the Fleet Impairment charged at the half
year has been reversed.
Historically, we have used a wide variety of funders to finance the purchase of
the Group's vehicle fleet. These facilities have ordinarily been of an
uncommitted nature. Over recent months we have seen a number of the Group's
funders withdrawing the headroom on their facilities as they themselves have
responded to the financial pressures brought on them by the credit crunch and in
some instances because they have withdrawn from their own UK lending activities.
Over the same period we have successfully obtained new facilities from new
lenders and we have also commenced discussions with a number of fleet funding
providers including, at their request, several of those funders who have only
recently withdrawn their facility headroom, with a view to securing longer term
committed facilities on amended terms. We believe that these discussions can be
concluded satisfactorily however the availability and terms of these committed
facilities is still to be determined and, as set out in note 1, there is no
guarantee that they will either be obtained or that they will be obtained on
terms acceptable to the Board.
Cash collections and settlement adjustments
Our key priority has been and remains to ensure that the Group improves cash
collections to break-even levels as soon as possible. In the Board's view,
reduction in back office insurer headcount and illiquidity issues within
insurers generally since the beginning of this calendar year has resulted in
them preferring short term preservation of their cash resources by slowing
payment of their liabilities, leaving them exposed to paying potentially
materially higher non-discounted charges and solicitor fees on claims as we
litigate them.
Whilst we increased cash collections in the year by 18% to GBP157.2 million
(2008: GBP133.0 million), in common with other businesses operating in our
sector, we have seen under-recoveries on closed claims ("Settlement
Adjustments") rise over recent months and on those claims closed more recently
these are now significantly exceeding levels previously anticipated and provided
for. As set out in more detail in the Business Review below and in notes 1 and 4
we have made an exceptional settlement adjustment charge in the year of GBP44.2
million (2008: GBPnil) (the "Exceptional Settlement Adjustment") to reflect the
approach taken towards recovery of amounts claimed.
Valuation of revenue, trade receivables, claims in progress and going concern
assumptions
We have produced forecasts which show that the Group will have sufficient funds
to meet its liabilities as they fall due and that it can continue to comply with
its banking covenants. As such the financial statements have been produced on a
going concern basis as narrated in note 1 ('Basis of Preparation').
The audit report on these financial statements is unqualified. Given the extent
of the recession and the unprecedented retraction of bank lending globally,
auditors generally are increasingly making readers of financial statements aware
of those factors that are considered to represent a "material uncertainty" by
the inclusion of "emphasis of matter" statements within their audit reports.
These emphasis of matter statements do not qualify the audit opinions on the
financial statements, they merely highlight certain factors as being of note.
We are not immune from the consequences of recession and the retraction of bank
and asset backed lending and, as stated above, we are currently renegotiating
future fleet funding facilities, a process that is expected to take several
months to conclude and the success of which cannot be guaranteed. The Group has
committed working capital facilities in place that do not expire until 30
September 2010, these being available subject, inter alia, to ongoing covenant
compliance. We have continued to comply with our banking covenants and to
operate within existing facilities. Whilst our financial projections show that
our existing facilities are sufficient and that the Group can continue to meet
its ongoing covenants, neither of these can be guaranteed. The existence of
these material uncertainties may cast significant doubt over the Group's ability
to continue as a going concern and this risk is reflected in the basis of
preparation (note 1) and the auditors' emphasis of matter paragraph in their
audit report.
In addition, we have to make estimates for the valuation of revenue, trade
receivable and claims in progress as reflected in these financial statements as
they depend, inter alia, on the ultimate Settlement Adjustment expected to arise
on claim closure. This is a judgmental process and is one that we have
experience of making. The events of this year have made this process more
challenging but nevertheless we feel we have a reasonable basis for determining
the amounts presented in these financial statements, and the auditors concur
with that view and the resultant valuations. However, there exists a material
uncertainty that settlement levels may be higher or lower than assumed and, to
the extent they are lower, further uncertainty would arise as to the Group's
ability to meet the covenants associated with the working capital facilities.
This material uncertainty is also reflected in the auditors' emphasis of matter
paragraph in their audit report.
We acknowledge these risks and we are focused on addressing them.
Financial results
The results for the year to 30 April 2009 have clearly been materially
influenced by the extent of the exceptional items incurred in the year (see note
4).
Adjusted results
The term 'Adjusted' is used to describe the financial results before exceptional
items, amortisation of acquired intangible assets, cost of share based payments
and change in fair value of derivative financial liability.
Adjusted revenue of GBP167.0 million was in line with the prior year (GBP161.9
million). Adjusted gross margin increased to 35.1% (2008: 31.9%), principally as
a result of lower depreciation charges consequent from having made the Fleet
Impairment, some improvement in CAP Monitor values in 2009 and reduced fleet
volumes.
Adjusted profit before tax was GBP13.3 million (2008: GBP13.9 million) with the
effects of reduced fleet utilisation and rental day mix and increased overheads
and interest charges being offset by reduced depreciation charges.
Adjusted basic earnings per share were 13.0 pence (2008: 14.1 pence).
As stated earlier the Board believes that illiquidity issues amongst insurers
adversely impacted upon timely settlement of our claims resulting in debtor days
(stated before the offset of the Exceptional Settlement Adjustment provision)
rising to 269 days as at 30 April 2009 (2008: 227 days).
Reported results
Total revenue reduced to GBP132.0 million from GBP161.9 million in the prior
year primarily because the majority of the Exceptional Settlement Adjustment
(see note 4) is treated as increased trade discount and is netted off of
disclosed revenue. After charging net exceptional and other items (see note 4)
of GBP68.7 million (2008: GBP4.0 million) the loss before tax was GBP55.4
million (2008: profit of GBP9.9 million). Both the loss before tax and adjusted
profit before tax were after an increase in net finance costs to GBP16.8 million
(2008: GBP12.0 million) principally as a result of the finance costs associated
with the Convertible Notes which were issued towards the end of the prior period
(see note 5). The basic loss per share was 56.6 pence (2008: earnings per share
of 9.4 pence).
Cash and borrowings
Cash at bank was GBP17.2 million at the year end (2008: GBP27.0 million) with
total working capital headroom against bank facilities of GBP17.2 million (2008:
GBP37.0 million) after a net cash outflow before net proceeds from borrowings of
GBP19.4 million (2008: net cash outflow of GBP30.3 million, also stated before
receipt of GBP46.6 million net proceeds of the Convertible Notes).
Total net debt as at 30 April 2009 was GBP149.8 million (2008: GBP149.0 million)
reflecting the reduction in vehicle finance lease obligations to GBP75.5 million
(2008: GBP97.3 million) referred to earlier, net of reduced cash balances and
the draw-down of a GBP10.0 million revolving credit facility during the year.
Dividends
In light of the current economic environment and until cash collection levels
improve and net debt reduces further, the Board does not anticipate recommending
the payment of a final dividend (2008: 1.5 pence per share), making the total
dividend for the year nil pence (2008: 2.5 pence per share).
People
The economic and trading issues have presented great challenges to all our
people. Dealing with cost reductions is never easy but each and every one have
risen to the challenges they faced. There is no better illustration of this than
the fact that virtually the entire Group has accepted significant changes to
their working patterns and benefits as well as accepting (the Board included)
salary and pension contribution reductions.
The commitment shown in these difficult times has been very impressive and I am
proud to be associated with such a dedicated workforce.
Outlook
The difficulties in the domestic and global economy in general and the
automotive and banking markets in particular have made this last year a
challenging one. Nevertheless, rental day activity to date in the new financial
year is holding up well with new account wins compensating so far for the
seasonal reduction in volumes normally seen at this time of year.
After the strenuous efforts to realign the rental fleet to current market
conditions, it is encouraging to see that the rental fleet utilisation had
improved to 61.8% by the end of the year (58.5% for the year to 30 April 2009)
and has improved further to 66.7% today on a revenue basis and 81.5% on a units
basis, a level that we have not seen for some years.
Our primary objective and biggest challenge continues to be the improvement in
cash collections and the achievement of cash flow break-even as soon as
possible.
David Galloway
Non-Executive Chairman
29 July 2009
BUSINESS REVIEW
Introduction
Accident Exchange is one of the UK's leading suppliers of credit hire
replacement vehicles to customers referred by 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 Belfast, Dartford, Glasgow and Warrington. DCML operates from its
offices in Stockport. Our services are provided throughout 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.
Key achievements during the year
Despite the significant challenges of the past year resulting from the combined
effects of the economic slowdown on motoring activity and accident rates
generally, the collapse of the retail automotive market and unprecedented
illiquidity problems within financial institutions which influenced insurer
payment profiles, the Group delivered adjusted revenue of GBP167.0 million, in
line with the previous year (2008: GBP161.9 million).
Initiatives included:
* Implemented cost reduction programmes to balance the size of the business with
the Group's expected share of the temporarily contracted market;
* Reduced our total fleet by 18% to 4,865 vehicles (2008: 5,935 vehicles) and
adjusted its composition to match current rental day mix;
* Eliminated more than GBP40.0 million of future fleet purchase commitments;
* Implemented 2.75% increase to the ABI GTA tariff with effect from 1 July 2009;
* Continued to drive a robust strategy of pursuing existing claims through
litigation where insurers fail to settle within the terms of the ABI General
Terms of Agreement;
* Increased cash collections by 18% to GBP157.2 million (2008: GBP133.0 million)
in spite of the significant illiquidity issues faced by insurers as a result of
the credit crunch;
* Supplied rental vehicles to 38,500 customers (2008: 41,000 customers);
* Recorded 1.1 million rental days (2008: 1.1 million);
* Contracted with a prestige automotive manufacturer to launch a unique 'non
credit hire' insurance based mobility proposition to all of their new car
customers from 1 October 2009; and
* Effected renewal of top four largest automotive dealer referral contracts in the
period.
Key Performance Indicators
The Board regularly reviews a number of key performance indicators ("KPIs") in
order to both manage the business and to ensure that the Group's strategic
priorities and objectives are being delivered. These include:
+---------------------------------------------------------+----------+----------+
| Key performance indicators | Year | Year |
| | ended | ended |
+---------------------------------------------------------+----------+----------+
| | 30 April | 30 April |
| | 2009 | 2008 |
+---------------------------------------------------------+----------+----------+
| | | Restated |
| | | (note 2) |
+---------------------------------------------------------+----------+----------+
| Operational KPIs | | |
+---------------------------------------------------------+----------+----------+
| Rental fleet (no. of vehicles) | 4,300 | 4,850 |
+---------------------------------------------------------+----------+----------+
| Customers supplied with rental vehicle (no.) | 38,500 | 41,000 |
+---------------------------------------------------------+----------+----------+
| Vehicle rental days | | |
+---------------------------------------------------------+----------+----------+
| Prestige vehicles (no. millions) | 0.5 | 0.6 |
+---------------------------------------------------------+----------+----------+
| Mainstream vehicles (no. millions) | 0.6 | 0.5 |
+---------------------------------------------------------+----------+----------+
| Total (no. millions) | 1.1 | 1.1 |
+---------------------------------------------------------+----------+----------+
| Rental fleet utilisation* | | |
+---------------------------------------------------------+----------+----------+
| First half of the financial year | 59.8% | 60.8% |
+---------------------------------------------------------+----------+----------+
| Second half of the financial year | 56.9% | 60.2% |
+---------------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------------+----------+----------+
| Financial KPIs | | |
+---------------------------------------------------------+----------+----------+
| Adjusted revenue (GBP'm) | 167.0 | 161.9 |
+---------------------------------------------------------+----------+----------+
| Adjusted profit before tax (GBP'm) | 13.3 | 13.9 |
+---------------------------------------------------------+----------+----------+
| Adjusted basic earnings per share (pence) | 13.0 | 14.1 |
+---------------------------------------------------------+----------+----------+
| Adjusted cash outflow from operations - after fleet | (13.7) | (20.1) |
| related cash flows (GBP'm) | | |
+---------------------------------------------------------+----------+----------+
| Exceptional Settlement Adjustment (GBP'm) | 44.2 | - |
+---------------------------------------------------------+----------+----------+
| Days sales in debtors (before Exceptional Settlement | 269 | 227 |
| Adjustment) | | |
+---------------------------------------------------------+----------+----------+
| Cash collections (GBP'm) | 157.2 | 133.0 |
+---------------------------------------------------------+----------+----------+
| Trade receivables by status | | |
+---------------------------------------------------------+----------+----------+
| - In house (GBP'm) | 64.3 | 66.4 |
+---------------------------------------------------------+----------+----------+
| - At solicitors, pre-issue (GBP'm) | 26.7 | 18.2 |
+---------------------------------------------------------+----------+----------+
| - At solicitors, proceedings issued (GBP'm) | 33.6 | 26.3 |
+---------------------------------------------------------+----------+----------+
| Exceptional fleet impairment (GBP'm) | 19.6 | - |
+---------------------------------------------------------+----------+----------+
| Fleet costs (depreciation, contract hire charges and | 29.9 | 40.9 |
| finance lease interest) | | |
+---------------------------------------------------------+----------+----------+
*Rental fleet utilisation is determined as the percentage of actual revenue
earned as compared to the potential total revenue earnable by the Group's fleet
of revenue generating vehicles.
An explanation of the changes in these KPIs during 2009 compared to the prior
year is set out in the remainder of this Business Review.
Operations
Overview
Our core market place remains automotive manufacturers and motor dealers, in
which we believe we have a leading position. Whilst commercial morale amongst
this automotive referral base has been low as a result of the economic downturn,
our core relationships remain strong. Contract renewals were agreed with a
number of major referrers during the year and there were no material account
losses. The accounts renewed included our four largest automotive channel
referrers. We continue to work with our referral partners to identify and then
exploit those opportunities which help them generate after-sales revenue.
Hire starts in the year were 38,500 (2008: 41,000), though rental days were
maintained at 1.1 million, in line with the prior year with the reduction in
hire starts being compensated by higher average rental length in H1 compared to
the prior year. However, this trend reversed materially during H2 due to the
speedier repair times facilitated by the spare capacity within the UK vehicle
repair network as noted in the Chairman's Statement.
Headcount rose during the first half of the year in anticipation of continuing
growth, peaking at 810. Swift action was taken as soon as there were indications
that the UK economy was heading into recession and referral volumes fell below
our previous growth expectations last Autumn with headcount ending the year at
775 (2008: 715) and with the per capita cost reducing with the co-operation of
our workforce.
A number of material cost reduction measures were implemented during the year,
predominantly in non-customer facing activities. These measures included
reductions in fleet additions, directors' and employees' salary and benefits,
changes to working practices and tightening of control over discretionary
expenditure, all of which were designed to better balance the cost base of the
business with levels of activity lower than originally forecast.
We recently won a new referring account from a competitor and volumes from this
referrer are now compensating for the normal seasonal reduction in volumes. This
account generates predominately mainstream vehicle referrals, leading to some
further realignment of the fleet to match the anticipated mix of referral
volumes.We also contracted with a prestige automotive manufacturer to launch a
unique 'non credit hire' insurance based mobility proposition to all of their
new car customers from 1 October 2009.
We are also pleased to note the recent 2.75% increase in car hire rates agreed
with insurers under the ABI General Terms of Agreement (2008: 3.50% increase)
which was implemented on 1 July 2009.
Cash collections and litigation
Whilst cash collections rose by 18% to GBP157.2 million (2008: GBP133.0
million), collecting our claims from insurers became increasingly more difficult
as the year progressed and noticeably more so since 1 January 2009. The Board
believes that from around this time insurers took actions to preserve their cash
resources in response to their own illiquidity problems rather than taking
advantage of the significant discounts available for prompt payment under the
ABI GTA. Whilst settling claims in a timely manner would have reduced the
overall claim costs (these costs rise not only if they fail to pay within 90
days under the GTA but also because of the litigation defence costs that fall
for payment by them after we litigate) it is clear from the extent of
"government bailout money" that was injected into financial institutions that
their liquidity problems were verging on critical.
In addition, insurers have cut their own back office functions to save costs,
reducing the effectiveness with which they can deal with claims and respond to
our attempts to settle claims within the ABI GTA timeframes.
In this materially changed financial environment, since January 2009 the task of
driving cash collections towards our targeted levels became increasingly
difficult and resulted in us having to both concede Settlement Adjustments at
levels materially higher than previously anticipated and provided for in
previous financial statements and increase both the speed and volume of claims
sent to our solicitor panel for litigation. We made reference to the increased
settlement adjustments in the Interim Management Statement released on 16 March
2009. Because of all of the issues narrated above, which meant that we were
trading through an unprecedented and changed external financial environment
which increased our cash flow pressures, we are treating the increased level of
Settlement Adjustment actually experienced in the period since 1 January of
GBP16.3 million as an exceptional item.
We then have also had to estimate the potential ongoing effect of these recent
settlement adjustment levels on the expected settlement adjustments that may be
experienced when closing trade receivables and claims in progress outstanding at
30 April 2009. We expect our litigation strategy, and the increased costs that
insurers will have to bear as a result of it, to eventually result in insurers
improving their appetite to save money by prompt payment and that in due course
this will outweigh their illiquidity issues. However, we cannot assume that this
will be seen in the immediate future and therefore we have also increased the
Settlement Adjustment that we apply to claims outstanding at the year end. This
increased Settlement Adjustment, which has also been treated as an exceptional
item given its size and origin, amounts to GBP27.9 million (making the
"Exceptional Settlement Adjustment" recognised in the results for the year
GBP44.2 million in aggregate (2008: GBPnil)).
We have made a number of improvements to our own in house collection processes
in the past few months in order to react to the back office issues being faced
by insurers. The aim of those changes has been to focus on improving the volume
of new claims settling before the expiry of 90 days within the range of normal
settlement discounts. We are encouraged by the early results of these
operational process changes.
We will, however, robustly litigate claims to maximise collection levels and in
recent months we have introduced litigation process improvements to deal with
the increased number of claims requiring litigation and so that we can better
counter and neutralise the tactics being adopted by some insurers. We expect
these process improvements to materially benefit both the speed and magnitude of
collections and to the extent they are successful, the GBP27.9 million
Exceptional Settlement Adjustment may or may not be crystallised in full. Our
primary objective continues to be the improvement in cash collections to a
minimum of cash flow break-even and beyond as soon as possible.
Litigation continues to be used when all reasonable avenues of compromise and
negotiation have failed to close the claim. The Group now has a panel of 18
specialist firms of solicitors who act in respect of those claims where the debt
remains outstanding after the 90 days provided by the ABI GTA.Cash collections
from the litigation process continued to improve, more than doubling to GBP31.8
million (2008: GBP14.1 million) as the Group expanded its appetite and capacity
to litigate during the year.
Fleet
We provide our services throughout the UK and during the first quarter of the
past year our existing depots in Coleshill, Glasgow and Warrington were
supplemented by depots in Belfast and Dartford. These additional depots have
enabled faster delivery times as well as reduced costs of delivery. We
continually strive for a balance between fleet size and mix across our depot
network with the profile and geographic spread of referrals so that we can
maintain like-for-like vehicle replacement on a brand and model basis, thereby
optimising utilisation and reinforcing brand loyalty with our referral partners'
customers.
The Board became concerned during Summer 2008 about the potential effects of a
recession on forecast referral volumes and the effect this would have on the
required size, profile and residual value of the Group's existing fleet.
Corrective action was taken quickly to reduce the level of exposure to adverse
changes in residual values and the level of risk associated with the fleet. By
renegotiating commercial terms with a number of our referral partners, the Group
has reduced future fleet purchases of over GBP40.0 million in return for one-off
commission payments of an aggregate GBP4.2 million (2008: GBPnil). This one-off
commission cost has been disclosed as an exceptional cost (note 4) in the year.
As a result of the actions taken, the rental fleet totalled 4,300 units at 30
April 2009 being 550 units (11%) fewer than a year previously and 1,070 units
(17%) fewer than at 31 October 2008. Future fleet purchase commitments have been
reduced materially to GBP30.3 million (2008: GBP101.4 million). We also reduced
our non-rental fleet from 1,085 vehicles to 565 vehicles, mainly by changing the
basis of vehicle provision within our Accident Management Solution away from
owned cars to cars brought in on short term flexible rental arrangements from
third party rental operators. As a result, the total fleet volume fell to 4,865
vehicles as at 30 April 2009 compared to 6,000 vehicles as at 31 October 2008
(30 April 2008: 5,935 vehicles).
The Group launched its AE Car Auction website (www.aecarauction.com) in January
2008 and during the current financial year has sold over 1,400 vehicles to trade
buyers for total consideration of GBP20.8 million (2008: 360 vehicles; GBP6.8
million). This has helped the Group counter some of the reduction in used
vehicle demand. AE Car Auction has improved flexibility around the disposal of
the rental fleet, reducing the cost associated with vehicle disposals and
maximising the proceeds from those disposals. In addition, the Group continues
to use conventional auction houses and a direct-to-trade route giving it the
opportunity to dispose of vehicles on the best available terms available.
Nevertheless, rapidly declining consumer confidence, particularly during the
Autumn period, sharply reduced demand for used vehicles. These exceptional
factors materially depressed forecast residual fleet values and were reflected
in the GBP19.6 million exceptional impairment charge made against the carrying
value of our fleet as at 31 October 2008 (2008: GBPnil).
Whilst CAP Motor Research ("CAP") valuations (from which we determined the Fleet
Impairment and which we use to determine subsequent and ongoing depreciation
charges - see notes 2 and 4) have improved recently, the Board has not reversed
any of the Fleet Impairment charge as these recent improvements are considered
to be short term in nature and to have arisen due to motor dealerships (the
probable buyer of our vehicles) currently suffering a shortage in supply of
quality second hand vehicles. Dealerships have not been selling their normal
volumes of new cars, thus reducing their normal intake of part-exchanged second
hand vehicles. Accordingly, they have had to buy in vehicles from external
sources and our sale prices have benefitted from this increased demand. The
economic outlook, and the uncertainty that still exists over likely fleet values
over the remaining period of ownership of the impaired fleet (up to 18 months),
is still extremely depressed and the Board believes that the prudent basis on
which it determined the requirement for a Fleet Impairment at 31 October 2008
still stands. Consequently we have not reversed any of the Fleet Impairment in
response to what has so far been a short term and small improvement in CAP
values.
If CAP values remain at current levels, the ongoing trading results of the
business will benefit from lower monthly depreciation charges. We estimate that
the trading results for the current year benefited by GBP5.8 million as a result
of these factors. It can also be seen from the financial statements that we
reported a profit on disposal for the year of GBP1.1 million arising on the sale
of 2,863 vehicles, an average of only GBP380 per car. Since 1 November 2008, the
basis of accounting for fleet depreciation is done on a monthly basis whereby we
predict the intended disposal date by vehicle and depreciate its previous month
end net book value down to its expected residual value (as forecast monthly by
CAP Monitor) over its expected remaining period of ownership. This process
should match the expected sale proceeds to CAP values on the presumed date of
disposal, resulting in zero profit or loss in the month of disposal. However,
within any one month we may defer or bring forward the disposal date of specific
vehicles and to the extent that sale proceeds also vary from CAP values
depending on local demand for specific models at auction, actual sale proceeds
can be higher or lower than the previous months' forecast CAP value for the
vehicles actually sold. These factors, together with the fantastic efforts of
the fleet team internally, have resulted in sale proceeds for certain models
exceeding the previous months' CAP expectation. In the month of disposal the
"depreciation adjustment" required to bring the previous months' net book value
to match the actual sale proceeds amount is treated as a profit or loss on
disposal in the month of sale rather than an adjustment to depreciation.
Financial results
Your attention is drawn to note 1: "Basis of preparation" and note 2: "Change in
accounting policy, restatement of prior year comparatives and change in
accounting estimate", all of which have resulted in changes to the magnitude and
disclosure of certain Income Statement items as compared to how we have reported
in previous years.
In particular we have changed our accounting estimates consequent from IAS 39
and IAS 18 resulting in the restatement of comparatives and the deferment of
GBP5.6 million of other operating income (see below) to future years. The profit
effect of this is to reduce current year loss before tax (after the effects of
prior year restatements) by GBP0.6 million compared to what would otherwise be
reported.
Revenue
Adjusted revenue was in line with the prior year at GBP167.0 million (2008:
GBP161.9 million). Accident management and related services (primarily credit
hire) revenue ("Accident Management Revenue") totalled GBP122.7 million (2008:
GBP121.6 million). Lower margin Credit Repair Revenue, which has been curtailed
since the year end, was GBP44.3 million (2008: GBP40.3 million) and generated a
gross margin of 4% (2008: 5%).
Accident Management Revenue reflects 1.1 million rental days (2008: 1.1
million), within which prestige rental activity decreased to 0.5 million days
(2008: 0.6 million days) and mainstream vehicle rental activity increased to 0.6
million days (2008: 0.5 million days). Accordingly, 52% of rental days were
generated by mainstream vehicles in the year compared to 47% in the prior year.
The growth in lower margin mainstream rental days reflects the full year effect
of certain large dealer and contract hire and leasing company account wins in
the prior year. The reduction in prestige rental days reflects the difficult
economic conditions in the prestige dealership market, reductions in the use of
prestige vehicles (possibly linked for part of the year to higher fuel costs)
and overall reductions in rental lengths. Mainstream referral volumes from a
significant new account win in March 2009 have countered the seasonal reduction
in volumes that ordinarily arise at the end of winter. This account win further
increases the proportion of mainstream rental days expected in the new financial
year.
Other operating income
As narrated in note 2 we have amended our adoption of IAS 39 and IAS 18 such
that the effective interest residing within the initial recognition of revenue
is deferred and released to the Income Statement as other operating income over
the expected credit period to claim closure.
Gross profit and margins
Adjusted gross profit was GBP58.6 million (2008: GBP51.7 million) and adjusted
gross margin increased to 35.1% (2008: 31.9%) principally as a result of lower
depreciation charges consequent from having reduced fleet costs with the Fleet
Impairment and subsequent improvement in CAP Monitor forecast fleet residual
values. After the exceptional charges set out in note 4 (primarily the Fleet
Impairment of GBP19.6 million (2008: GBPnil) and GBP43.6 million of Exceptional
Settlement Adjustment (2008: GBPnil)) the Group recorded a gross loss of GBP8.8
million (2008: gross profit of GBP51.7 million).
Rental fleet utilisation for the year of 58.5% (2008: 60.5%) was lower than
originally expected due to growth being curtailed by deterioration in the UK
economy and its impact on referral volumes. However, following realignment of
the rental fleet in light of reduced levels of business, utilisation improved to
61.8% by the end of the year and has further improved to 66.7% today on a
revenue basis and 81.5% on a units basis, a level that we have not seen for some
years.
Administrative expenses
Administrative expenses before exceptional and other items rose to
GBP34.1 million (2008: GBP29.0 million), of which GBP24.8 million or 73% (2008:
GBP21.1 million or 73%) related to headcount, premises and IT communications
related costs. Total administrative expenses increased to GBP36.3 million from
GBP32.0 million in the prior year, primarily as a result of the above factors.
Settlement estimation and impairment of receivables
The Group recognises revenue, claims in progress and trade receivables at
amortised cost using the effective interest rate method after an allowance for
any discounts that are expected to arise under the terms of the ABI General
Terms of Agreement and net of any other settlement adjustments expected to arise
on the settlement of claims. This judgment is made on the basis of historical
and expected net recovery from the settlement of claims and is influenced by the
approach taken towards recovery of amounts claimed.
As set out in the Chairman's Statement, our key priority remains to ensure that
the Group improves cash flow. Whilst we have increased cash collections in the
year to GBP157.2 million (2008: GBP133.0 million) we have, we believe in common
with other businesses operating in our sector, seen settlement adjustment levels
rise since 1 January 2009 and settlement adjustment levels on claims closed more
recently have exceeded previously anticipated and provided levels. The Group has
considered the impact of this on the carrying value of trade receivables and
claims in progress as at 30 April 2009 and has made an Exceptional Settlement
Adjustment provision of GBP27.9 million (2008: GBPnil), which together with the
Exceptional Settlement Adjustment of GBP16.3 million (2008: GBPnil) actually
experienced in the last four months of the year, has resulted in an aggregate
Exceptional Settlement Adjustment (see note 4) charge in the year of GBP44.2
million (2008: GBPnil).
We will seek to minimise the crystallisation of the GBP27.9 million provision
and will continue to negotiate with insurers promptly, allowing them to take
advantage of the discounts available to them under the ABI GTA. Failure by them
to pay within 90 days will still mean that we will litigate on the claim and our
appetite is undiminshed to see the claim heard in court if required. Litigation
leads to a longer time frame to receipt but would also see an increase in the
level of cash expected to be received on claim closure. Our task is to balance
the flow of cash receipts from claims with the potential longer term value of a
claim, bearing in mind insurers' willingness and ability to pay, combined with
our own objectives of attaining and maintaining break-even collection levels.
Fleet, residual values and Fleet Impairment
As we set out in our Interim Report, from last Autumn there was a marked
deterioration in the outlook for the UK economy and, with it, a fall in consumer
confidence. As a result there was a significant reduction in demand for new and
used vehicles that materially depressed forecast fleet values. In light of those
events the Group reviewed the carrying value of every vehicle in its fleet and
determined the requirement for a consequent GBP19.6 million exceptional
impairment charge.
The Group uses data provided by CAP Motor Research ("CAP") to help predict the
future residual values of its vehicle fleet on a vehicle-by-vehicle basis
depending on its age, original purchase price and current and expected mileage.
It uses empirical data gathered from manufacturers, dealers and auction houses
which are assessed in a forward-looking model to drive forecast residual values
on a model-by-model basis.
Further details as to the determination of the GBP19.6 million Fleet Impairment
charge are given in note 4.
The Board reviewed the Group's depreciation policy at the half year in light of
the issues set out above. As a result, the basis of determining the ongoing
monthly depreciation charge on vehicles was amended, effective from October 2008
so that for each vehicle, on a monthly basis, its residual value at its intended
disposal date is predicted based on the Board's view of data provided by CAP,
with the difference between its net book value and its CAP value being
depreciated over its remaining expected period of ownership. Vehicle
depreciation is therefore now more volatile than under the previous straight
line basis, but will carry the advantage of immediately reflecting any further
positive or negative variances in expected CAP values.
Further exceptional and other items
As set out in note 4 below, further exceptional costs of GBP5.0 million (2008:
GBPnil) have been incurred as a result of implementing various cost reduction
measures.
The prior period contained exceptional items of (i) GBP0.9 million which was
incurred in respect of professional advisor fees and termination costs
associated with the early redemption of the Group's working capital facilities
that were replaced by the senior secured credit agreement with Morgan Stanley
Bank International Limited ("Morgan Stanley") entered into in July 2008; and
(ii) costs of GBP1.1 million in launching Accident Management Schemes for newly
acquired referral partners. There were no such costs for either of these in the
year ended 30 April 2009.
In order to present the Board's view of underlying trading performance and
thereby aid and improve an understanding of the Group's financial performance,
we have consistently presented certain items as either non-trading or
exceptional.
Amortisation of acquired intangible assets and costs of share based payments are
non-trading and non-cash charges and, in line with prior periods, have therefore
been excluded in determining adjusted profit.
The change in fair value of the derivative financial liability, being the equity
conversion option attaching to the Convertible Notes, is also non-cash and is
driven by market factors largely beyond the Group's control and has therefore
also been excluded in determining adjusted profit.
Further details of non-trading and exceptional items are set out in note 4.
Net finance costs
Total net finance costs were GBP15.3 million (2008: GBP13.0 million). Interest
payable on bank loans, principally the Morgan Stanley Facility, net of interest
receivable on cash deposits was GBP3.2 million (2008: GBP3.3 million). Vehicle
finance lease interest rose to GBP8.0 million (2008: GBP7.1 million) reflecting
an increase in fleet acquired through finance leases rather than on contract
hire terms.
Net finance costs also include the full year cost of the Convertible Notes of
GBP5.6 million (2008: four month cost of GBP1.7 million) comprising a 5.5% cash
coupon component payable twice yearly of GBP2.8 million in aggregate (2008:
GBP0.9 million) and GBP2.8 million (2008: GBP0.8 million) in aggregate in
respect of accreted interest (payable in 2013 only if the Convertible Notes are
not converted to equity by January 2013), amortisation of issue costs and
amortisation of the value attributed to the equity conversion component at
inception, which was separately recognised as a derivative financial liability.
The change in the fair value of the Convertible Notes of GBP1.5 million is a
non-cash credit for the year (2008: charge of GBP0.9 million) and has been
disclosed as an exceptional item as narrated above.
Loss before tax
The Group recorded a loss before tax of GBP55.4 million (2008: profit of GBP9.9
million) primarily as a result of the exceptional items detailed above.
Taxation
The effective tax rate for the year was 27.4% (2008: 32.3%) including the effect
of the disallowable nature of the GBP1.5 million credit (2008: charge of GBP0.9
million) 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 30.8% (2008: 28.1%).
The reduction in capital allowances from 25% to 20% has materially reduced the
annual level of tax relief that will arise from our investment in our fleet and
other capital assets. The increased level of related timing differences has
consequently led to the recognition of an associated deferred tax asset of
GBP2.2 million (2008: deferred tax liability of GBP3.9 million).
As at 30 April 2009 deferred tax assets totalled GBP8.2 million (2008: deferred
tax liability of GBP3.3 million), the movement of GBP11.5 million reflecting
primarily the above change in capital allowances (GBP6.1 million) and an asset
of GBP6.7 million in respect of current year tax losses (2008: GBPnil). These
tax losses are available for offset against future tax charges.
Earnings / (loss) per share
The basic loss per share (note 7) was a loss of 56.6 pence per share (2008:
earnings per share of 9.4 pence) and adjusted earnings per share was 13.0 pence
per share (2008: 14.1 pence per share).
As the current year's statutory result before taxation was a loss, fully diluted
loss per share is equal to the basic loss per share of 56.6 pence (2008: diluted
earnings per share of 9.5 pence). Adjusted diluted earnings per share (note 8)
was 9.6 pence per share (2008: 12.0 pence per share), the dilution primarily
reflecting the maximum potential dilutive effect of the Convertible Notes.
Cash Flows
Cash flows from operating activities
Cash generated from operations for the year improved to GBP34.2 million (2008:
GBP24.9 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 flows from operations | Year | | Year |
| | ended | | ended |
+---------------------------------------------------------+--------+---+--------+
| | 30 | | 30 |
| | April | | April |
| | 2009 | | 2008 |
+---------------------------------------------------------+--------+---+--------+
| | GBP'm | | GBP'm |
+---------------------------------------------------------+--------+---+--------+
| Operating (loss) / profit | (40.1) | | 22.9 |
+---------------------------------------------------------+--------+---+--------+
| Depreciation, fleet impairment and amortisation of | 41.3 | | 24.0 |
| intangible assets | | | |
+---------------------------------------------------------+--------+---+--------+
| (Profit) / loss on disposal of vehicles, plant and | (1.1) | | 1.3 |
| equipment | | | |
+---------------------------------------------------------+--------+---+--------+
| Cost of share based payments | 0.9 | | 0.6 |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| EBITDA | 1.0 | | 48.8 |
+---------------------------------------------------------+--------+---+--------+
| Changes in working capital: | | | |
+---------------------------------------------------------+--------+---+--------+
| Decrease / (increase) in trade and other receivables | | | |
| and claims in progress | | | |
| due to: | | | |
+---------------------------------------------------------+--------+---+--------+
| Movement before exceptional charges | (24.7) | } | (44.3) |
+---------------------------------------------------------+--------+ + +
| Realised exceptional settlement adjustments | 16.3 | | |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| | (8.4) | | (44.3) |
+---------------------------------------------------------+--------+---+--------+
| Exceptional charge for potential increased settlement | 27.9 | | - |
| adjustment | | | |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| Decrease / (increase) in trade and other receivables | 19.5 | | (44.3) |
| and claims in progress | | | |
+---------------------------------------------------------+--------+---+--------+
| Increase in payables | 5.5 | | 4.5 |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| Adjusted cash inflow from operations | 26.0 | | 9.0 |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| Proceeds of vehicle disposals | 35.2 | | 43.9 |
+---------------------------------------------------------+--------+---+--------+
| VAT recovered on fleet acquisition | 8.2 | | 15.9 |
+---------------------------------------------------------+--------+---+--------+
| Capital element of finance lease payments: | | | |
+---------------------------------------------------------+--------+---+--------+
| Deposits | (5.3) | | (10.2) |
+---------------------------------------------------------+--------+---+--------+
| Monthly repayments | (31.0) | | (25.2) |
+---------------------------------------------------------+--------+---+--------+
| Balloon repayment at disposal | (38.8) | | (46.4) |
+---------------------------------------------------------+--------+---+--------+
| Finance cost element of finance lease payments | (8.0) | | (7.1) |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| Fleet related cash flows | (39.7) | | (29.1) |
+---------------------------------------------------------+--------+---+--------+
| | | | |
+---------------------------------------------------------+--------+---+--------+
| Adjusted cash outflow from operations - after fleet | (13.7) | | (20.1) |
| related cash flows | | | |
+---------------------------------------------------------+--------+---+--------+
This shows a reduction in adjusted cash outflow from operations after fleet
related cash flows from GBP20.1 million in 2008 to GBP13.7 million in 2009,
reflecting improvement in adjusted cash inflow from operations to GBP26.0
million (2008: GBP9.0 million) net of cash outflows arising from ownership of
the fleet rising from GBP29.1 million to GBP39.7 million.
The improvement in adjusted cash inflow from operations to GBP26.0 million was
lower than our expectations caused, in the Board's view, by the impact of the
deterioration in the economic environment and its impact on insurers' own
illiquidity and consequent inability to settle our claims in a timely manner.
This has driven a consequent increase in debtor days (before the Exceptional
Settlement Adjustment provision of GBP27.9 million) to 269 days (2008: 227
days). The increase in trade receivables during the prior year reflected growth
in the business and the adverse impact of a subsequently defeated legal
challenge as to the enforceability of certain of the Group's historical hire
agreements.
Of the total fleet, 4,483 vehicles (92%) were owned (as opposed to contract hire
rented - where cash flows are deducted from cash outflow from operations) as at
30 April 2009 as compared to 4,858 (82% of total fleet) at 30 April 2008. Cash
flows associated with finance leased vehicles depend on the rate of cycling the
fleet during the year.
During the year 2,487 finance leased vehicles were acquired (2008: 3,924) at a
VAT inclusive cost of GBP53.3 million (2008: GBP101.9 million). As such, VAT
recovered on fleet additions reduced to GBP8.2 million from GBP15.9 million in
2008 and the deposit paid on acquisition reduced to GBP5.3 million from GBP10.2
million.
A total of 2,863 finance leased vehicles were disposed during the year (2008:
2,830 vehicles) generating proceeds of GBP36.6 million of which GBP1.4 million
was received shortly after the year end (2008: GBP43.9 million all of which was
received before the year end) which funded the repayment of finance lease debt
outstanding at disposal of GBP38.8 million and GBP46.4 million respectively. The
gap per vehicle inherent in the closing fleet has narrowed as a result of recent
CAP valuation improvements and because we are able to keep the vehicles to
nearer the end of their anticipated two year life now that utilisation rates
have improved to more acceptable levels.
Net cash flow from operating activities
Net interest paid rose to GBP13.2 million (2008: GBP9.8 million) reflecting the
full year payment of the 5.50% cash coupon on the Convertible Notes of GBP2.8
million (2008: GBPnil) and increased finance lease interest resulting from
financing the majority of fleet acquisitions through finance lease arrangements
whereas a higher proportion were acquired on contract hire terms in the previous
year.
After corporation tax receipts of GBP1.5 million generated through the carry
back of current year tax losses against prior year taxable profits which was
already attained by the end of the year (2008: tax payments of GBP3.5 million)
net cash inflow from operating activities was GBP22.5 million (2008: GBP11.6
million).
Investing activities
In addition to the cash flows associated with finance leased fleet, other net
capital expenditure reduced to GBP0.8 million (2008: GBP2.0 million), the prior
year spend included completion of infrastructure improvements at the Group's
head office.
Financing and net debt
Working capital facilities
As at 30 April 2009, the GBP40.0 million Morgan Stanley Facility (repayable in
September 2010) was fully drawn (2008: GBP30.0 million of GBP40.0 million) and
cash at bank was GBP17.2 million (2008: GBP27.0 million). The Group's total
headroom against working capital facilities as at 30 April 2009 was therefore
also GBP17.2 million (2008: GBP37.0 million).
The Group has reported compliance with its banking covenants throughout the year
and, based on its most recent trading and financial projections, the Board
believes that the Group will continue to comply with its covenants. The
covenants include net debt to profitability covenants, an interest cover
covenant and a debtor leverage covenant, all of which are tested quarterly in
line with the Group's reporting periods, and are as detailed in the Interim
Report released in December 2008 and available from the Group's website at
www.accidentexchange.com.
Net debt
Net debt of GBP149.8 million has reduced materially from the GBP174.0 million
reported as at 31 October 2008, primarily through the reduction in finance lease
debt from GBP106.5 million at that date to GBP75.5 million as at 30 April 2009.
Net debt is analysed as follows:
+------------------------------------------------------+-----------+-----------+
| Analysis of net debt | 30 April | 30 April |
+------------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------------+-----------+-----------+
| | GBP'm | GBP'm |
+------------------------------------------------------+-----------+-----------+
| Working capital facilities drawn down | 40.0 | 30.0 |
+------------------------------------------------------+-----------+-----------+
| Other bank loans | 1.8 | 2.2 |
+------------------------------------------------------+-----------+-----------+
| Finance lease obligations | 75.5 | 97.3 |
+------------------------------------------------------+-----------+-----------+
| Convertible Notes | 50.0 | 50.0 |
+------------------------------------------------------+-----------+-----------+
| Cash at bank | (17.2) | (27.0) |
+------------------------------------------------------+-----------+-----------+
| | 150.1 | 152.5 |
+------------------------------------------------------+-----------+-----------+
| Derivative financial liability recognised at | (0.6) | (0.6) |
| inception of Convertible Notes excluded from net | | |
| debt | | |
+------------------------------------------------------+-----------+-----------+
| Convertible Notes finance charges accrued | 3.6 | 1.5 |
+------------------------------------------------------+-----------+-----------+
| Unamortised debt issue costs | (3.3) | (4.4) |
+------------------------------------------------------+-----------+-----------+
| Net debt | 149.8 | 149.0 |
+------------------------------------------------------+-----------+-----------+
Net bank debt
Net bank debt (excluding finance lease obligations and the Convertible Notes,
and after offset of related debt issue costs of GBP0.8 million (2008: GBP1.2
million)) was GBP23.8 million (2008: GBP4.0 million), which includes a bank loan
of GBP1.8 million (2008: GBP2.2 million) in connection with infrastructure
improvements at the Group's administration centre and main fleet facility.
Finance lease obligations
Finance lease obligations reduced from GBP97.3 million as at 30 April 2008 to
GBP75.5 million as at 30 April 2009, reflecting a substantial reduction in new
debt for fleet replacement and expansion to GBP53.3 million (2008: GBP101.9
million) resulting from fleet reduction measures taken during the year, net of
capital repayments of GBP75.1 million (2008: GBP81.8 million).
Dividends
Dividends of GBP1.1 million (2008: GBP1.8 million) were paid during the year,
consisting of the final dividend for 2008 of 1.5 pence per share declared on 30
June 2008 and paid on 9 September 2008. No interim dividend for 2009 was paid
(2008: 1.0 pence per share) and no further dividends will be declared until cash
collections improve and net debt reduces.
Other balance sheet items
Capital expenditure of GBP45.6 million (2008: GBP86.9 million) related
principally to cycling of the vehicle fleet with 2,487 vehicles acquired under
VAT inclusive finance lease arrangements at a capital (VAT exclusive) cost of
GBP44.6 million (2008: 3,924 vehicles at a VAT exclusive cost of GBP85.3
million).
Claims in progress reduced to GBP10.6 million (2008: GBP15.7 million) reflecting
lower levels of credit hire revenue in Q4 FY2009 compared to the prior period
and a slight shortening of the time taken to invoice closed claims.
Principal risks and uncertainties
A number of principal operational and financial risks are faced by the Group
that could affect its performance, including:
* the residual value of rental vehicles;
* fleet costs, funding and efficiency (including suppliers, the price of new
vehicles, availability and cost of fleet financing, and fleet utilisation);
* estimation of the level of adjustment to trade receivables that is expected to
arise upon settlement of claims;
* dependence on IT systems and key personnel; and
* risks relating to the industry including insurance industry protocols,
competition and risks associated with referring partners.
The principal financial risks and uncertainties comprise:
* the nature of receivables in that our claims against motor insurance companies
can be subject to dispute which may result in financial loss to the Group. The
Directors estimate 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;
* credit risk arises due to the magnitude and nature of the claim collection
process which can be protracted. Credit risk also arises in relation to cash on
deposit;
* liquidity risk exists as the Group is dependent upon the continuing availability
of working capital facilities to finance its day-to-day business and finance
lease and contract hire facilities to fund the acquisition of vehicles for its
fleet (see note 1). The ongoing availability of the Group's working capital
facilities is dependent, inter alia, upon continued covenant compliance.
Availability of fleet funding, which is currently obtained from a variety of
lenders ranging from highly rated financial institutions to vehicle manufacturer
related finance houses, is dependent upon continued appetite of these funders to
finance vehicles.
* interest rate risk exists on the Group's level of overall indebtedness, which is
set out in note 13.With the exception of the Convertible Notes, these borrowings
are issued at variable rates, which exposes the Group to cash flow interest rate
risk. The Convertible Notes are issued at a fixed rate and expose the Group to
fair value interest rate risk
Our people
In addition to the Chairman's comments, our thanks go to each and every employee
of Accident Exchange and DCML for their exceptional commitment over the past
year in difficult times.
Looking ahead
The Board retains a strong focus on the tasks of driving cash flows to at least
break-even through close control over costs and most importantly improvements in
cash collection levels.
Steve Evans Martin Andrews
Chief Executive Group Finance Director
29 July 2009 29 July 2009
Consolidated Income Statement
For the year ended 30 April 2009
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | Year | Year | Year | Year | Year | Year |
| | | ended | ended | ended | ended | ended | ended |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | 30 April | 30 April | 30 | 30 April | 30 | 30 |
| | | | | April | | April | April |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | Before | Excep | Total | Before | Excep | Total |
| | | excep | -tional | | excep | -tional | |
| | | -tional | and | | -tional | and | |
| | | and | other | | and other | other | |
| | | other | items* | | items* | items* | |
| | | items* | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | | | | Restated | | Restated |
| | | | | | (note 2) | | (note 2) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| |Note | GBP'm | GBP'm | GBP'm | GBP'm | GBP'm | GBP'm |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Revenue | 3 | 167.0 | (35.0) | 132.0 | 161.9 | - | 161.9 |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Cost of sales | | (108.4) | (32.4) | (140.8) | (110.2) | - | (110.2) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Gross profit / | | 58.6 | (67.4) | (8.8) | 51.7 | - | 51.7 |
| (loss) | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Administrative | | | | | | | |
| expenses | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Amortisation | | - | (0.5) | (0.5) | - | (0.5) | (0.5) |
| of acquired | | | | | | | |
| intangible | | | | | | | |
| assets | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Share based payments | | - | (0.9) | (0.9) | - | (0.6) | (0.6) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Exceptional costs | | - | (0.8) | (0.8) | - | (1.9) | (1.9) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Other | | (34.1) | - | (34.1) | (29.0) | - | (29.0) |
| administrative | | | | | | | |
| expenses | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | (34.1) | (2.2) | (36.3) | (29.0) | (3.0) | (32.0) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Other operating | 3 | 5.6 | (0.6) | 5.0 | 3.2 | - | 3.2 |
| income | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Operating profit / | | 30.1 | (70.2) | (40.1) | 25.9 | (3.0) | 22.9 |
| (loss) | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Finance income | 5 | 0.5 | - | 0.5 | 0.8 | - | 0.8 |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Finance costs | 5 | (17.3) | - | (17.3) | (12.8) | (0.1) | (12.9) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Change in fair value | 5 | - | 1.5 | 1.5 | - | (0.9) | (0.9) |
| of derivative | | | | | | | |
| financial liability | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Profit / (loss) | | 13.3 | (68.7) | (55.4) | 13.9 | (4.0) | 9.9 |
| before tax | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Taxation | 6 | (4.1) | 19.3 | 15.2 | (3.9) | 0.7 | (3.2) |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Profit / (loss) for the | 9.2 | (49.4) | (40.2) | 10.0 | (3.3) | 6.7 |
| year | | | | | | |
+--------------------------------+----------+----------+---------+-----------+---------+----------+
| | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Earnings / (loss) | | | | | | | |
| per share | | | | | | | |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Basic | 7 | 13.0p | | (56.6)p | 14.1p | | 9.4p |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
| Diluted | 8 | 9.6p | | (56.6)p | 12.0p | | 9.5p |
+-------------------------+------+----------+----------+---------+-----------+---------+----------+
*Other items consist of amortisation of acquired intangible assets, cost of
share based payments and change in fair value of derivative financial liability.
Exceptional and other items are set out in note 4.
All results are attributable to continuing operations.
The Directors do not recommend payment of a final dividend for the year ended 30
April 2009 (2008: 1.5 pence per share). No interim dividend was paid (2008: 1.0
pence per share) resulting in a total dividend of GBPnil for the year ended 30
April 2009 (2008: 2.5 pence per share).
Consolidated Balance Sheet
At 30 April 2009
+--------------------------------------------+------+------------+-------------+
| | | 30 April | 30 April |
+--------------------------------------------+------+------------+-------------+
| | | 2009 | 2008 |
+--------------------------------------------+------+------------+-------------+
| | | | Restated |
| | | | (note 2) |
+--------------------------------------------+------+------------+-------------+
| |Note | GBP'm | GBP'm |
+--------------------------------------------+------+------------+-------------+
| Assets | | | |
+--------------------------------------------+------+------------+-------------+
| Non-current assets | | | |
+--------------------------------------------+------+------------+-------------+
| Property, plant and equipment | 10 | 62.2 | 93.7 |
+--------------------------------------------+------+------------+-------------+
| Goodwill | | 21.5 | 21.5 |
+--------------------------------------------+------+------------+-------------+
| Other intangible assets | | 2.6 | 3.2 |
+--------------------------------------------+------+------------+-------------+
| Deferred tax asset | 14 | 8.2 | - |
+--------------------------------------------+------+------------+-------------+
| | | 94.5 | 118.4 |
+--------------------------------------------+------+------------+-------------+
| Current assets | | | |
+--------------------------------------------+------+------------+-------------+
| Claims in progress | | 10.6 | 15.7 |
+--------------------------------------------+------+------------+-------------+
| Trade and other receivables | 11 | 97.0 | 109.9 |
+--------------------------------------------+------+------------+-------------+
| Cash and cash equivalents | | 17.2 | 27.0 |
+--------------------------------------------+------+------------+-------------+
| | | 124.8 | 152.6 |
+--------------------------------------------+------+------------+-------------+
| Non-current assets held for sale | 12 | 1.0 | 0.3 |
+--------------------------------------------+------+------------+-------------+
| | | 125.8 | 152.9 |
+--------------------------------------------+------+------------+-------------+
| Total assets | | 220.3 | 271.3 |
+--------------------------------------------+------+------------+-------------+
| Liabilities | | | |
+--------------------------------------------+------+------------+-------------+
| Current liabilities | | | |
+--------------------------------------------+------+------------+-------------+
| Financial liabilities - borrowings | 13 | (46.3) | (39.0) |
+--------------------------------------------+------+------------+-------------+
| Trade and other payables | | (24.7) | (19.2) |
+--------------------------------------------+------+------------+-------------+
| Current tax liabilities | | (0.4) | (2.6) |
+--------------------------------------------+------+------------+-------------+
| | | (71.4) | (60.8) |
+--------------------------------------------+------+------------+-------------+
| Net current assets | | 54.4 | 92.1 |
+--------------------------------------------+------+------------+-------------+
| Non-current liabilities | | | |
+--------------------------------------------+------+------------+-------------+
| Financial liabilities - borrowings | 13 | (120.7) | (137.0) |
+--------------------------------------------+------+------------+-------------+
| Derivative financial liabilities | 13 | - | (1.5) |
+--------------------------------------------+------+------------+-------------+
| Deferred tax liabilities | 14 | - | (3.3) |
+--------------------------------------------+------+------------+-------------+
| | | (120.7) | (141.8) |
+--------------------------------------------+------+------------+-------------+
| Total liabilities | | (192.1) | (202.6) |
+--------------------------------------------+------+------------+-------------+
| Net assets | | 28.2 | 68.7 |
+--------------------------------------------+------+------------+-------------+
| | | | |
+--------------------------------------------+------+------------+-------------+
| Shareholders' equity | | | |
+--------------------------------------------+------+------------+-------------+
| Share capital | 15 | 3.6 | 3.6 |
+--------------------------------------------+------+------------+-------------+
| Share premium | | 26.2 | 26.2 |
+--------------------------------------------+------+------------+-------------+
| Other reserves | | 11.5 | 11.5 |
+--------------------------------------------+------+------------+-------------+
| Retained earnings | | (13.1) | 27.4 |
+--------------------------------------------+------+------------+-------------+
| Total shareholders' equity | | 28.2 | 68.7 |
+--------------------------------------------+------+------------+-------------+
Consolidated Cash Flow Statement
For the year ended 30 April 2009
+--------------------------------------------+------+------------+--------------+
| | | Year ended | Year ended |
+--------------------------------------------+------+------------+--------------+
| | | 30 April | 30 April |
+--------------------------------------------+------+------------+--------------+
| | | 2009 | 2008 |
+--------------------------------------------+------+------------+--------------+
| |Note | GBP'm | GBP'm |
+--------------------------------------------+------+------------+--------------+
| Cash flows from operating activities | | | |
+--------------------------------------------+------+------------+--------------+
| Cash generated from operations | 16 | 34.2 | 24.9 |
+--------------------------------------------+------+------------+--------------+
| Finance income received | | 0.7 | 0.6 |
+--------------------------------------------+------+------------+--------------+
| Finance costs on bank loans | | (3.1) | (3.3) |
+--------------------------------------------+------+------------+--------------+
| Finance costs on Convertible Notes | | (2.8) | - |
+--------------------------------------------+------+------------+--------------+
| Finance cost element of finance lease | | (8.0) | (7.1) |
| payments | | | |
+--------------------------------------------+------+------------+--------------+
| Taxation recovered / (paid) | | 1.5 | (3.5) |
+--------------------------------------------+------+------------+--------------+
| Net cash inflow from operating activities | | 22.5 | 11.6 |
+--------------------------------------------+------+------------+--------------+
| | | | |
+--------------------------------------------+------+------------+--------------+
| Cash flows from investing activities | | | |
+--------------------------------------------+------+------------+--------------+
| Purchase of property, plant and equipment | | (1.0) | (1.9) |
+--------------------------------------------+------+------------+--------------+
| Purchase of intangible assets | | - | (0.1) |
+--------------------------------------------+------+------------+--------------+
| Proceeds from sale of property | | 0.2 | - |
+--------------------------------------------+------+------------+--------------+
| Proceeds from sale of vehicles, plant and | | 35.2 | 43.9 |
| equipment | | | |
+--------------------------------------------+------+------------+--------------+
| Acquisition of subsidiary, net of cash | | - | (0.2) |
| acquired | | | |
+--------------------------------------------+------+------------+--------------+
| Net cash inflow from investing activities | | 34.4 | 41.7 |
+--------------------------------------------+------+------------+--------------+
| | | | |
+--------------------------------------------+------+------------+--------------+
| Cash flows from financing activities | | | |
+--------------------------------------------+------+------------+--------------+
| Proceeds from issue of Convertible Notes | 13 | - | 50.0 |
+--------------------------------------------+------+------------+--------------+
| Convertible Notes issue costs | 13 | - | (3.4) |
+--------------------------------------------+------+------------+--------------+
| Proceeds from borrowings | 17 | 10.0 | 33.9 |
+--------------------------------------------+------+------------+--------------+
| Repayment of borrowings | 17 | (0.4) | (30.1) |
+--------------------------------------------+------+------------+--------------+
| Capital element of finance lease payments | 17 | (75.1) | (81.8) |
+--------------------------------------------+------+------------+--------------+
| Purchase of own shares | | (0.1) | - |
+--------------------------------------------+------+------------+--------------+
| Dividends paid | 9 | (1.1) | (1.8) |
+--------------------------------------------+------+------------+--------------+
| Net cash used in financing activities | | (66.7) | (33.2) |
+--------------------------------------------+------+------------+--------------+
| Net (decrease) / increase in cash and cash | | (9.8) | 20.1 |
| equivalents | | | |
+--------------------------------------------+------+------------+--------------+
| Cash and cash equivalents at beginning of | | 27.0 | 6.9 |
| the year | | | |
+--------------------------------------------+------+------------+--------------+
| Cash and cash equivalents at end of the | | 17.2 | 27.0 |
| year | | | |
+--------------------------------------------+------+------------+--------------+
Consolidated Statement of Changes in Equity
For the year ended 30 April 2009
+---------------------------------+---------+---------+----------+----------+--------+
| | Share | Share | Other | Retained | Total |
| | capital | premium | reserves | earnings | |
+---------------------------------+---------+---------+----------+----------+--------+
| | | | | Restated | |
| | | | | (note 2) | |
+---------------------------------+---------+---------+----------+----------+--------+
| | GBP'm | GBP'm | GBP'm | GBP'm | GBP'm |
+---------------------------------+---------+---------+----------+----------+--------+
| At 1 May 2007 - as previously | 3.6 | 26.2 | 11.5 | 23.4 | 64.7 |
| reported | | | | | |
+---------------------------------+---------+---------+----------+----------+--------+
| Prior year adjustment (note 2) | - | - | - | (1.5) | (1.5) |
+---------------------------------+---------+---------+----------+----------+--------+
| At 1 May 2007 - restated | 3.6 | 26.2 | 11.5 | 21.9 | 63.2 |
+---------------------------------+---------+---------+----------+----------+--------+
| Total recognised income and | - | - | - | 6.7 | 6.7 |
| expense | | | | | |
+---------------------------------+---------+---------+----------+----------+--------+
| Equity settled share based | - | - | - | 0.6 | 0.6 |
| payments | | | | | |
+---------------------------------+---------+---------+----------+----------+--------+
| Dividends paid (note 9) | - | - | - | (1.8) | (1.8) |
+---------------------------------+---------+---------+----------+----------+--------+
| At 30 April 2008 | 3.6 | 26.2 | 11.5 | 27.4 | 68.7 |
+---------------------------------+---------+---------+----------+----------+--------+
| Total recognised income and | - | - | - | (40.2) | (40.2) |
| expense | | | | | |
+---------------------------------+---------+---------+----------+----------+--------+
| Equity settled share based | - | - | - | 0.9 | 0.9 |
| payments | | | | | |
+---------------------------------+---------+---------+----------+----------+--------+
| Purchase of shares for Employee | - | - | - | (0.1) | (0.1) |
| Trust | | | | | |
+---------------------------------+---------+---------+----------+----------+--------+
| Dividends paid (note 9) | - | - | - | (1.1) | (1.1) |
+---------------------------------+---------+---------+----------+----------+--------+
| At 30 April 2009 | 3.6 | 26.2 | 11.5 | (13.1) | 28.2 |
+---------------------------------+---------+---------+----------+----------+--------+
Notes to the Final Results Announcement
For the year ended 30 April 2009
1.Basis of preparation
The Group's consolidated financial statements have been prepared by the
Directors 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 2006 applicable to
those companies reporting under IFRS.
The financial statements have been prepared under the historical cost
convention, except for the costs of share based payments and derivative
financial liabilities; these are stated at fair value. The consolidated
financial statements are presented in pounds sterling and all values are rounded
to the nearest GBP0.1 million unless otherwise indicated.
The principal accounting policies of the Group are set out in the Group's Annual
Report and Accounts 2009 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.
Settlement estimation and going concern
Background
As described in the Chairman's Statement and Business Review and as detailed in
the financial statements and related notes, the current economic environment has
adversely impacted the Group's levels of business, profitability and cash flows
from those either previously anticipated by the Board or as compared to the
previous year.
The Group recorded a loss after tax for the year of GBP40.2 million (2008:
profit of GBP6.7 million), principally as a result of charging net exceptional
and other items with a post-tax cost of GBP49.4 million (2008: GBP3.3 million)
(see note 4), and a net cash outflow before net proceeds from borrowings of
GBP19.4 million (2008: net cash outflow of GBP30.3 million, also stated before
receipt of the net proceeds of the Convertible Notes). Nonetheless, the Group
had working capital headroom of GBP17.2 million at 30 April 2009 (2008: GBP37.0
million) and operated within its banking covenants and met all capital and
interest payments as they fell due on its borrowings during the year and in the
subsequent period to date.
The Directors have prepared forecasts which show that the Group will have
sufficient funds to meet its liabilities as they fall due, and that it will
continue to meet its banking covenants, for a period of at least twelve months
from the date of approving these financial statements.
These forecasts include key assumptions around the future performance of the
Group, which require the Group to, inter alia, i) attain sufficient cash
collection levels on a sustained basis; ii) continue to monitor and manage its
working capital within available facilities; iii) manage the cost base in
response to changes in debtor collection and settlement adjustment levels and
its expected share of the market; and iv) manage its fleet requirements against
anticipated activity levels and within available fleet facility levels or source
required vehicles via alternate means. The assumptions are based on measures
that have already been implemented, or which the Directors consider are
reasonable to assume can be implemented and which will continue to be monitored
and evaluated in order to achieve the forecasts.
Settlement estimation
The Group recognises revenue, claims in progress and trade receivables at
amortised cost using the effective interest rate method after an allowance for
any discounts that are expected to arise under the terms of the ABI General
Terms of Agreement and net of any other settlement adjustments expected to arise
on the settlement of claims. This judgment is made on the basis of historical
and expected net recovery from the settlement of claims and is influenced by the
approach taken towards recovery of amounts claimed.
1.Basis of preparation (continued)
Settlement estimation (continued)
The uncertainty surrounding these estimation processes has increased in the
current year as, in common with other businesses operating in our sector and for
the reasons set out in the Business Review, we have seen settlement adjustment
levels rise from 1 January 2009 to the year end. Whilst cash collection levels
increased over this period, settlement adjustments on claims closed since the
beginning of the calendar year have substantially exceeded previously
anticipated and provided levels. The Group has considered the impact of this on
the carrying value of trade receivables and claims in progress as at 30 April
2009 and has made an Exceptional Settlement Adjustment provision of GBP27.9
million (2008: GBPnil), which together with the Exceptional Settlement
Adjustment of GBP16.3 million (2008: GBPnil) actually experienced in the last
four months of the year, has resulted in an aggregate Exceptional Settlement
Adjustment charge in the year of GBP44.2 million (2008: GBPnil) (see note 4).
Whilst the Directors believe that they have a reasonable basis for deriving the
settlement estimation adjustments as reflected in the financial statements as at
30 April 2009, the ultimate settlements agreed through negotiation with, or
litigation against, at fault parties' insurers in relation to the outstanding
claims in progress and trade receivables may be higher or lower than that which
has been estimated in the preparation of the financial statements and therefore
represents a significant risk and a material uncertainty.
Going concern basis
The financial statements have been prepared on a going concern basis, which
assumes that the Group has adequate resources to continue in operational
existence for the foreseeable future.
The Group's working capital facilities are of a committed nature and do not
expire until 30 September 2010. However, the validity of the going concern
assumption depends in part on the Group being able to collect its trade
receivables on a sufficient and timely basis at a level of settlement adjustment
that will enable the Group to operate within its working capital facilities and
associated covenants which, as set out above, represents a significant risk and
a material uncertainty.
The going concern basis further depends upon the Group having either sufficient
funding to finance its planned vehicle acquisition volumes or to be able to
source vehicles from alternate rental providers so as to be able to replace
maturing fleet and manage the size and mix of the fleet in response to levels of
business.
Historically, the Group has used a wide variety of funders, including highly
rated financial institutions and vehicle manufacturer related finance houses, to
finance the purchase of its vehicle fleet. These facilities have been of an
uncommitted nature and over recent months several of the Group's funders have
withdrawn the headroom on available facilities as they themselves have responded
to the pressures brought on them by the credit crunch. The Group has therefore
commenced discussions with a number of fleet funding providers including, at
their request, several of those funders who have only recently withdrawn their
facility headroom, with a view to securing longer term committed facilities on
amended terms. The Board believe that these discussions can be concluded
satisfactorily however the availability and terms of these committed facilities
is still to be determined and there is no guarantee that they will either be
obtained or that they will be obtained on terms acceptable to the Board and
hence this represents a significant risk and a material uncertainty.
The Directors have already implemented measures to reduce the cost base and
restrict capital outflow in order to preserve cash and headroom against existing
funding facilities. Further actions that either have been or will be implemented
as appropriate to manage cash flows include the agreement of block settlements,
curtailment of low margin working capital consumptive credit repair activities,
flexibility around vehicle purchase commitments and the ability to rent vehicles
on a short term basis from alternate sources alleviating the need for vehicle
finance.
The Directors acknowledge that the combination of these circumstances represents
a material uncertainty that casts significant doubt upon the Group's ability to
continue to operate within its existing banking facility and covenants, to
finance its planned vehicle acquisition volumes and consequently to continue as
a going concern. The financial statements do not include the adjustments
required to the carrying values of assets, to reflect the fact that the Group
may be unable to realise its assets at the values they are stated at in these
financial statements nor adjustments to liabilities to reflect additional
liabilities arising, were the Group unable to continue as a going concern.
1.Basis of preparation (continued)
Going concern basis (continued)
After making enquiries, whilst considering the uncertainties described above and
after taking account of the plan to reduce settlement adjustments on improved
cash collections, the curtailment of credit repair activities and the
expectation of being able to implement the required vehicle fleet management
measures, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. For these reasons, they continue to adopt the going concern basis in
preparing the financial statements.
2.Change in accounting policy, restatement of prior year comparatives and change
in accounting estimate
Change in accounting policy - prior year adjustment
In all previously reported financial statements and Interim Reports, in adopting
IAS 39 and IAS 18, and in particular regarding the determination of the fair
value and the nominal amount (after allowances for settlement adjustments) of
trade receivables and claims in progress, the Board has made assumptions that
the future settlement periods likely to be attained from improved operational
cash collection processes would show material shortening from the settlement
periods suggested by the debtor days outstanding at each previous period end. As
such the magnitude of the effective interest residing within the initial
recognition of revenue (and therefore trade receivables and claims in progress)
has previously been considered to be immaterial; with the consequence that there
were no deductions from revenue to be subsequently released to the income
statement as finance income over the length of the anticipated collection
period.
As at 30 April 2007 the Board considered the worsening of the debtor day period
(from 130 days to 176 days) to reflect the uncertainty introduced by the
Enforceability Challenge (as defined in the financial statements for the year
ended 30 April 2008). The Enforceability Challenge was eventually defeated in
November 2007, a much longer period than anticipated by the Board in April 2007.
Also, despite the balance sheet strengthening facilitated by the GBP50.0 million
Convertible Loan Note issued in January 2008, debtor day periods continued to
worsen through to 30 April 2008 (to 227 days). The Board believed that debtor
day periods had peaked in April 2008 and that improved operational processes,
the strengthened balance sheet and litigation collection efforts would combine
to drive shorter collection periods thereafter. The effects of the credit crunch
from the autumn of 2008 and the liquidity issues faced by some insurers as set
out in the Business Review are believed by the Board to have contributed to
debtor days continuing to rise to 269 days (stated before the net off of the
Exceptional Settlement Adjustment provision) by 30 April 2009.
The Board has also set out in the Business Review the background to the
Exceptional Settlement Adjustment charged in the results for the year ended 30
April 2009. The Board believes that its current cash collection processes will
now see a progressive reduction in debtor day periods, this being facilitated by
litigation and by the Exceptional Settlement Adjustment potentially facilitating
more flexible negotiation with, and therefore quicker payment profiles from,
insurers.
However, from the levels at which debtor day collection periods currently stand
(269 days before the Exceptional Settlement Adjustment), the timescales for
improvements in debtor days expected by the Board suggest that the effect of
discounting trade receivables and claims in progress as at 30 April 2009 is no
longer immaterial in the context of the results reported for the year.
IAS 8 requires entity management to change accounting policies where it results
in the financial statements providing reliable and more relevant information
about the effects of transactions, other events or conditions on the entity's
financial position.
As a result, for the financial statements for the year ended April 2009, the
Board has changed its approach to accounting for the effective interest rate and
is now reflecting the impact of discounting given the collection periods being
experienced. This change includes a restatement of the comparatives for 2008,
being a reduction in revenue consequent from discounting trade receivables and
the recognition in other operating income of finance income accruing on a time
basis by reference to the principal outstanding and the effective interest rate
applicable. In so doing, the Board has considered the requirement of the IASB
Framework paragraph 39 that the financial statements should be comparable
"through time in order to identify trends in its financial position and
performance".
2. Change in accounting policy, restatement of prior year comparatives and
change in accounting estimate (continued)
Restatement of prior year comparatives
The Board has historically treated not only all discounts arising under the GTA
but also all other settlement adjustments arising on claim closure as generic
industry "trade discounts" and, thereby in accordance with IAS 39, has deducted
the aggregate of these amounts from revenue. The Board now treats settlement
adjustments that are over and above the maximum GTA level of documented
discounts as an impairment against the carrying value of trade receivables as
opposed to additional trade discounts and as such they are charged to cost of
sales. This serves to separate the treatment of GTA levels of discount from
additional adjustments conceded for settlement. This is a disclosure point only
as the impact on the results for the year ended 30 April 2008 is to increase
both revenue and cost of sales by GBP2.2 million with profit before tax
unchanged.
The impact on the prior year comparatives of the change in accounting policy and
the amendment to the disclosure of settlement adjustments described above is as
follows:
+---------------------------+------------+------------+------------------+----------+
| | As | Change in | Reclassification | Restated |
| | previously | accounting | of settlement | |
| | reported | policy | adjustments | |
+---------------------------+------------+------------+------------------+----------+
| Year ended 30 April 2008 | GBP'm | GBP'm | GBP'm | GBP'm |
+---------------------------+------------+------------+------------------+----------+
| Revenue | 165.1 | (5.4) | 2.2 | 161.9 |
+---------------------------+------------+------------+------------------+----------+
| Cost of sales | (108.0) | - | (2.2) | (110.2) |
+---------------------------+------------+------------+------------------+----------+
| Other operating income | - | 3.2 | - | 3.2 |
+---------------------------+------------+------------+------------------+----------+
| Profit before tax | 12.1 | (2.2) | - | 9.9 |
+---------------------------+------------+------------+------------------+----------+
| Taxation | (3.8) | 0.6 | - | (3.2) |
+---------------------------+------------+------------+------------------+----------+
| Profit for the year | 8.3 | (1.6) | - | 6.7 |
+---------------------------+------------+------------+------------------+----------+
| Claims in progress | 16.2 | (0.5) | - | 15.7 |
+---------------------------+------------+------------+------------------+----------+
| Trade receivables | 113.7 | (3.8) | - | 109.9 |
+---------------------------+------------+------------+------------------+----------+
| Deferred tax | (4.5) | 1.2 | - | (3.3) |
+---------------------------+------------+------------+------------------+----------+
| Shareholders' funds | 71.8 | (3.1) | - | 68.7 |
+---------------------------+------------+------------+------------------+----------+
Change in accounting estimate
During the year the Board has reviewed the basis on which depreciation of the
Group's motor vehicles is calculated. From October 2008 the ongoing monthly
depreciation charge for each vehicle, on a monthly basis, is determined by
reference to its expected residual value at its intended disposal date. The
expected residual value is determined from a review of data provided by CAP,
with the difference between its current net book value and the anticipated
residual value being depreciated over the remaining period of ownership to
expected disposal date. Net book values as at 31 October 2008 were also reduced
by the Fleet Impairment referred to in the Business Review.
IAS 8 requires disclosure of the impact of a change in basis of applying an
accounting policy on both the current and future periods. Had the fleet
continued to be depreciated on the previous straight line basis of 22.5% per
annum, the depreciation charge for the year ended 30 April 2009 would have been
c.GBP5.8 million higher than reported in these financial statements. This
difference does not, however, take into account the effect that the Fleet
Impairment would have had on the depreciation charge under the previous
(straight line) basis of estimation.
Monthly vehicle depreciation now fluctuates with changes in CAP forecast
residual values and is therefore now more variable than under the previous
straight line basis. Consequently it is not possible to reliably estimate the
effect of this change on depreciation charges in future periods. It will however
carry the advantage of immediately reflecting any further positive or negative
variances in expected CAP values.
3.Revenue and other operating income
An analysis of the Group's revenue and other operating income is as follows:
+-----------------------------------------------+--------------+--------------+
| | Year ended | Year ended |
+-----------------------------------------------+--------------+--------------+
| | 30 April | 30 April |
+-----------------------------------------------+--------------+--------------+
| | 2009 | 2008 |
+-----------------------------------------------+--------------+--------------+
| | | Restated |
| | | (note 2) |
+-----------------------------------------------+--------------+--------------+
| | GBP'm | GBP'm |
+-----------------------------------------------+--------------+--------------+
| Delivery of accident management and related | 122.7 | 121.6 |
| services | | |
+-----------------------------------------------+--------------+--------------+
| Credit repair | 44.3 | 40.3 |
+-----------------------------------------------+--------------+--------------+
| Revenue before exceptional charge | 167.0 | 161.9 |
+-----------------------------------------------+--------------+--------------+
| Exceptional Settlement Adjustment | (35.0) | - |
+-----------------------------------------------+--------------+--------------+
| Revenue | 132.0 | 161.9 |
+-----------------------------------------------+--------------+--------------+
| Other operating income before exceptional | 5.6 | 3.2 |
| charge | | |
+-----------------------------------------------+--------------+--------------+
| Exceptional adjustment to operating income | (0.6) | - |
+-----------------------------------------------+--------------+--------------+
| Other operating income | 5.0 | 3.2 |
+-----------------------------------------------+--------------+--------------+
| | 137.0 | 165.1 |
+-----------------------------------------------+--------------+--------------+
The Exceptional Settlement Adjustment relates principally to revenue arising on
the delivery of accident management and related services.
Other operating income consists of interest income in relation to claims in
progress and trade receivables, which is accrued on a time basis by reference to
outstanding trade receivables and at the effective interest rate applicable.
4.Exceptional and other items
+-----------------------------------------------+--------------+--------------+
| | Year ended | Year ended |
+-----------------------------------------------+--------------+--------------+
| | 30 April | 30 April |
+-----------------------------------------------+--------------+--------------+
| | 2009 | 2008 |
+-----------------------------------------------+--------------+--------------+
| | GBP'm | GBP'm |
+-----------------------------------------------+--------------+--------------+
| Exceptional items | | |
+-----------------------------------------------+--------------+--------------+
| Exceptional Settlement Adjustment: | | |
+-----------------------------------------------+--------------+--------------+
| - charged as an adjustment to revenue | 35.0 | - |
+-----------------------------------------------+--------------+--------------+
| - charged to cost of sales as an impairment | 8.6 | - |
| to receivables | | |
+-----------------------------------------------+--------------+--------------+
| - charged as an adjustment to other operating | 0.6 | - |
| income | | |
+-----------------------------------------------+--------------+--------------+
| | 44.2 | - |
+-----------------------------------------------+--------------+--------------+
| Fleet impairment - charged to cost of sales | 19.6 | - |
+-----------------------------------------------+--------------+--------------+
| Cost reduction expense: | | - |
+-----------------------------------------------+--------------+--------------+
| - charged to cost of sales | 4.2 | - |
+-----------------------------------------------+--------------+--------------+
| - charged to administrative expenses | 0.8 | - |
+-----------------------------------------------+--------------+--------------+
| | 5.0 | - |
+-----------------------------------------------+--------------+--------------+
| Accident Management Scheme launch costs | - | 1.1 |
+-----------------------------------------------+--------------+--------------+
| Refinancing costs | - | 0.9 |
+-----------------------------------------------+--------------+--------------+
| Total exceptional items | 68.8 | 2.0 |
+-----------------------------------------------+--------------+--------------+
| Other items | | |
+-----------------------------------------------+--------------+--------------+
| Amortisation of acquired intangible assets | 0.5 | 0.5 |
+-----------------------------------------------+--------------+--------------+
| Cost of share based payments | 0.9 | 0.6 |
+-----------------------------------------------+--------------+--------------+
| Change in fair value of derivative financial | (1.5) | 0.9 |
| liability | | |
+-----------------------------------------------+--------------+--------------+
| Other items | (0.1) | 2.0 |
+-----------------------------------------------+--------------+--------------+
| Total exceptional and other items | 68.7 | 4.0 |
+-----------------------------------------------+--------------+--------------+
4. Exceptional and other items (continued)
Exceptional settlement adjustment
The Group recognises revenue and trade receivables after an allowance for any
discounts that are expected to arise under the terms of the ABI General Terms of
Agreement and net of any expected adjustments arising on the settlement of
claims. This judgment is made on the basis of historical and expected net
recovery from the settlement of claims and is influenced by the approach taken
towards recovery of amounts claimed.
Whilst the Group increased cash collections to GBP157.2 million for the year
(2008: GBP133.0 million) we have, we believe in common with other businesses
operating in our sector, seen settlement adjustment levels rise since 1 January
2009 and settlement adjustment levels on claims closed more recently exceeded
previously anticipated and provided levels. Given the size and origin of the
recent increase in settlement adjustment levels we have disclosed its effect as
an exceptional item comprising two parts. The Group has considered the potential
impact of this on the carrying value of trade receivables and claims in progress
as at 30 April 2009 and has made an exceptional provision against these balances
of, in aggregate, GBP27.9 million (2008: GBPnil), which together with the
exceptional enhanced settlement adjustment of GBP16.3 million (2008: GBPnil)
actually experienced in the last four months of the year, has resulted in an
aggregate exceptional charge of GBP44.2 million (2008: GBPnil).
The exceptional enhanced settlement adjustment of GBP16.3 million experienced in
the last four months of the year was determined as being the difference between
the settlement adjustments which arose at claim closure less the previously
provided settlement level, which was based on historical experience prior to 1
January 2009. The GBP27.9 million increase from previously provided levels to
the higher settlement adjustment levels now applied to closing trade receivables
and claims in progress as at 30 April 2009 has been determined as a result of
the increase in these experienced settlement rates and the approach taken
towards future recovery of amounts claimed.
The Board believes it has implemented improved cash collection processes
recently in response to insurer payment profile changes. Litigation will be used
robustly to maximise collection levels and in recent months we have introduced
litigation process improvements to counter and neutralise defence tactics being
adopted by insurers. We expect these process improvements to materially benefit
both the speed and magnitude of collections and to the extent they materialise
the GBP27.9 million provision may not be crystallised. This is certainly an
objective, always bearing in mind our primary objective of driving improved cash
collections to a minimum of cash flow break-even. The material uncertainty
surrounding the estimation process for settlement adjustments is described in
note 1.
Fleet impairment
Events since mid-September, particularly in the banking sector, led to a marked
deterioration in the outlook for the UK economy and, with it, a fall in consumer
confidence. As a result there was a significant reduction in demand for new and
used vehicles that materially depressed forecast residual fleet values.
In light of these events the Group reviewed the carrying value of every vehicle
in its fleet as at 31 October 2008 and determined the requirement for a
consequent GBP19.6 million exceptional impairment charge.
The exceptional impairment charge was derived by firstly identifying each
individual vehicle within the total fleet as an individual cash generating unit
("CGU"). The carrying value of each CGU was then compared to its recoverable
amount, determined as the higher of its "fair value less costs to sell" or its
"value in use", with the aggregation of each CGU impairment totalling GBP19.6
million.
The Group uses data obtained from CAP Motor Research ("CAP") as the basis for
determining the Board's view of the residual values of each CGU.
Determination of "fair value less costs to sell" was based on the Board's view
of CAP's December market value data less expected selling costs. Determination
of "value in use" was based on the Board's projections of pre-tax cash flows
arising from the use of each CGU over its expected period of ownership
(typically up to 24 months) together with the Board's view of CAP's December
projected disposal proceeds for each CGU at its intended disposal date. A
pre-tax discount rate of 10%, based on the Group's weighted average cost of
capital, was used to then discount the projected pre-tax cash flows (including
disposal proceeds) to ascertain each CGU's "value in use".
4. Exceptional and other items (continued)
Fleet impairment (continued)
The key assumptions were the pre-tax discount rate applied and the expected
residual value determined by reference to CAP data as outlined above. Had the
discount rate been 0.5 percentage points higher or lower, the impairment charge
would have been GBP0.3 million higher / lower. A 1% change in assumed residual
value would have changed the impairment by GBP0.5 million.
As referenced in the Business Review, whilst CAP Monitor valuations (from which
we determined the Fleet Impairment and which we use to determine subsequent and
ongoing depreciation charges) have improved slightly recently, the Board has not
reversed any of the Fleet Impairment charge as these recent improvements are
considered to have arisen from economic conditions that are short term in
nature. The Group is benefitting from reduced depreciation charges as a result
of the Fleet Impairment and subsequent CAP valuation movements with depreciation
in the period being GBP5.8 million lower than it would otherwise have been.
Cost reduction expense
The Board became concerned during the first half of the year about the potential
effects of a recession on the Group's profitability. The Group therefore started
to take corrective action in Summer 2008, which continued into the second half,
to reduce the level of exposure to adverse changes in fleet residual values and
the level of risk associated with fleet. By re-negotiating commercial terms with
a number of our referral partners the Group has avoided future fleet purchases
of over GBP40.0 million in return for one-off commission payments in aggregate
of GBP4.2 million (2008: GBPnil).
In addition, the Group incurred a one-off charge of GBP0.8 million (2008:
GBPnil) as a result of rationalising its overhead cost base in light of lower
levels of trading, the charge included headcount reduction costs and
cancellation of its sponsorship of the BMW entry in the 2009 British Touring
Cars Championship.
Amortisation of acquired intangible assets
The amortisation of acquired intangible assets is a non-trading and non-cash
charge and has been excluded in determining adjusted profit.
Cost of share based payments
The cost of share based payments is also a non-trading and non-cash charge and
has been excluded in determining adjusted profit.
Change in fair value of derivative financial liability
The change in fair value of the derivative financial liability, being the equity
conversion option attaching to the Convertible Notes is driven by market factors
largely beyond the Group's control and has therefore been excluded in
determining adjusted profit.
Accident Management Scheme launch costs
During the prior period the Group incurred administrative expenses of GBP1.1
million launching Accident Management Schemes for and on behalf of newly
acquired referring dealer and manufacturer partners. These costs were disclosed
as exceptional items due to the significant magnitude of this investment.
Refinancing costs
On 15 June 2007 the Group announced that it had entered into a GBP45.0 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 GBP0.9 million
was made in connection with this redemption, consisting of professional adviser
fees of GBP0.8 million and GBP0.1 million of termination costs imposed by the
terms and conditions of those facilities (charged to finance costs).
5.Finance income and costs
+--------------------------------------------------+------------+--------------+
| | Year ended | Year ended |
+--------------------------------------------------+------------+--------------+
| | 30 April | 30 April |
+--------------------------------------------------+------------+--------------+
| | 2009 | 2008 |
+--------------------------------------------------+------------+--------------+
| | GBP'm | GBP'm |
+--------------------------------------------------+------------+--------------+
| Finance income | | |
+--------------------------------------------------+------------+--------------+
| Interest income on bank balances | 0.5 | 0.8 |
+--------------------------------------------------+------------+--------------+
| Finance costs | | |
+--------------------------------------------------+------------+--------------+
| Bank borrowings | (3.7) | (4.1) |
+--------------------------------------------------+------------+--------------+
| Obligations under finance leases | (8.0) | (7.1) |
+--------------------------------------------------+------------+--------------+
| Convertible Notes | (5.6) | (1.7) |
+--------------------------------------------------+------------+--------------+
| Total finance costs | (17.3) | (12.9) |
+--------------------------------------------------+------------+--------------+
| Change in fair value of derivative financial | 1.5 | (0.9) |
| liability | | |
+--------------------------------------------------+------------+--------------+
| Net finance costs | (15.3) | (13.0) |
+--------------------------------------------------+------------+--------------+
The finance costs of the Convertible Notes of GBP5.6 million (2008: GBP1.7
million) includes a charge of GBP2.8 million (2008: GBP0.9 million) in respect
of the 5.50% coupon payable twice yearly and GBP2.8 million (2008: GBP0.8
million) 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 (note 13).
6.Taxation
The standard rate of corporation tax in the UK reduced from 30% to 28% with
effect from 1 April 2008. As a result, the average standard rate of corporation
applicable to the Group for the year was 28% (2008: 29.8%). The tax credit for
the year is lower (2008: a higher charge) than the average standard rate of
corporation tax in the UK of 28% as explained below:
+--------------------------------------------------+------------+--------------+
| | Year ended | Year ended |
+--------------------------------------------------+------------+--------------+
| | 30 April | 30 April |
+--------------------------------------------------+------------+--------------+
| | 2009 | 2008 |
+--------------------------------------------------+------------+--------------+
| | | Restated |
| | | (note 2) |
+--------------------------------------------------+------------+--------------+
| | GBP'm | GBP'm |
+--------------------------------------------------+------------+--------------+
| (Loss) / profit before tax | (55.4) | 9.9 |
+--------------------------------------------------+------------+--------------+
| | | |
+--------------------------------------------------+------------+--------------+
| (Loss) / profit before tax multiplied by the | (15.5) | 3.0 |
| rate of corporation tax in the UK of 28% (2008: | | |
| 29.8%) | | |
+--------------------------------------------------+------------+--------------+
| Effect of: | | |
+--------------------------------------------------+------------+--------------+
| Expenses not deductible for tax purposes | 0.1 | 0.6 |
+--------------------------------------------------+------------+--------------+
| Adjustments in respect of prior years | 0.2 | (0.4) |
+--------------------------------------------------+------------+--------------+
| Deferred tax on share based payment charges | 0.2 | - |
+--------------------------------------------------+------------+--------------+
| Adjustment in respect of change in tax rate | (0.2) | - |
+--------------------------------------------------+------------+--------------+
| Tax on (loss) / profit on ordinary activities | (15.2) | 3.2 |
+--------------------------------------------------+------------+--------------+
The Group has a deferred tax asset of GBP8.2 million (2008: liability of GBP3.3
million) of which GBP6.7 million (2008: GBPnil) arose in connection with the
taxable loss for the year, which is available for offset against future tax
charges of the company in which they arose. The Group has an expectation that
taxable profits will be generated in future years and has accordingly recognised
a deferred tax asset of GBP6.7 million (2008: GBPnil) in respect of the losses.
Changes to the UK capital allowances regime will reduce the level of annual
capital allowances available on a proportion of the Group's future fleet
purchases, the full impact of which is still being assessed.
7.Basic earnings per share
Basic loss / earnings per share is calculated by dividing the loss / earnings
attributable to ordinary shareholders by the weighted average number of shares
in issue during the year.
Details of the loss / earnings and weighted average number of ordinary shares
used in the calculations are set out below:
+------------------------------------------------+-------------+--------------+
| | Year ended | Year ended |
+------------------------------------------------+-------------+--------------+
| | 30 April | 30 April |
+------------------------------------------------+-------------+--------------+
| | 2009 | 2008 |
+------------------------------------------------+-------------+--------------+
| | | Restated |
| | | (note 2) |
+------------------------------------------------+-------------+--------------+
| (Loss) / earnings attributable to ordinary | (40.2) | 6.7 |
| shareholders (GBP'm) | | |
+------------------------------------------------+-------------+--------------+
| Weighted average number of ordinary shares | 71,014,214 | 71,138,544 |
+------------------------------------------------+-------------+--------------+
| Basic (loss) / earnings per share (pence) | (56.6) | 9.4 |
+------------------------------------------------+-------------+--------------+
Adjusted basic earnings per share
To understand the underlying trading performance, the Directors consider it
appropriate to disclose basic earnings per share before exceptional and other
items. The calculation of adjusted earnings per share is set out below:
+------------------------------------------------+-------------+--------------+
| | Year ended | Year ended |
+------------------------------------------------+-------------+--------------+
| | 30 April | 30 April |
+------------------------------------------------+-------------+--------------+
| | 2009 | 2008 |
+------------------------------------------------+-------------+--------------+
| | | Restated |
| | | (note 2) |
+------------------------------------------------+-------------+--------------+
| (Loss) / earnings attributable to ordinary | (40.2) | 6.7 |
| shareholders (GBP'm) | | |
+------------------------------------------------+-------------+--------------+
| Post-tax cost of exceptional items (GBP'm) | 49.6 | 1.4 |
+------------------------------------------------+-------------+--------------+
| Post-tax (income) / cost of other items | (0.2) | 1.9 |
| (GBP'm) | | |
+------------------------------------------------+-------------+--------------+
| Adjusted profit on ordinary activities after | 9.2 | 10.0 |
| taxation (GBP'm) | | |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Weighted average number of ordinary shares | 71,014,214 | 71,138,544 |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Basic (loss) / earnings per share (pence) | (56.6) | 9.4 |
+------------------------------------------------+-------------+--------------+
| Cost of exceptional items (pence) | 69.9 | 2.0 |
+------------------------------------------------+-------------+--------------+
| (Income) / cost of other items (pence) | (0.3) | 2.7 |
+------------------------------------------------+-------------+--------------+
| Adjusted basic earnings per share (pence) | 13.0 | 14.1 |
+------------------------------------------------+-------------+--------------+
8.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. As set out in the Company's notice of extraordinary general
meeting dated 7 December 2007 and in accordance with the terms and conditions of
the Convertible Notes contained in the offering circular dated 4 January 2008
(copies of each being available on the Company's website), the conversion price
of the Convertible Notes was subject to adjustment on the first anniversary of
their issue. Accordingly, on 9 January 2009 the conversion price was adjusted to
75.4 pence per ordinary share.
For the purposes of the fully diluted weighted average number of shares, the
Group is required to assume that the Convertible Notes are converted at the
above 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
prior year was 20.7 million. The Group's earnings have been adjusted for the
post-tax finance costs associated with the Convertible Notes.
8.Diluted earnings per share (continued)
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.
Potential ordinary shares are treated as dilutive only when their conversion to
ordinary shares would decrease earnings per share or increase loss per share.
The post-tax finance costs of the Convertible Notes for the period were GBP2.6
million (2008: GBP2.1 million). As a consequence the issue of 66.3 million
shares that would result from conversion means that the loss per share would
decrease. Diluted loss per share is therefore equal to the basic loss of 56.6
pence per share (2008: diluted earnings of 9.5 pence per share).
Adjusted diluted earnings per share
The calculation of adjusted diluted earnings per share is set out below. It
assumes the same adjustments as shown in note 7 together with the post-tax
finance costs of the Convertible Notes as set out below:
+--------------------------------------------------+-------------+-------------+
| | Year ended | Year ended |
+--------------------------------------------------+-------------+-------------+
| | 30 April | 30 April |
+--------------------------------------------------+-------------+-------------+
| | 2009 | 2008 |
+--------------------------------------------------+-------------+-------------+
| | | Restated |
| | | (note 2) |
+--------------------------------------------------+-------------+-------------+
| (Loss) / earnings attributable to ordinary | (40.2) | 6.7 |
| shareholders (GBP'm) | | |
+--------------------------------------------------+-------------+-------------+
| Post-tax finance costs of Convertible Notes | 2.6 | 2.1 |
| (GBP'm) | | |
+--------------------------------------------------+-------------+-------------+
| Post-tax cost of exceptional items (GBP'm) | 49.6 | 1.4 |
+--------------------------------------------------+-------------+-------------+
| Post-tax (income) / cost of other items (GBP'm) | (0.2) | 1.9 |
+--------------------------------------------------+-------------+-------------+
| Post-tax income / (cost) of change in fair value | 1.4 | (0.9) |
| of derivative financial liability included | | |
| within other items (GBP'm) | | |
+--------------------------------------------------+-------------+-------------+
| Adjusted profit on ordinary activities after | 13.2 | 11.2 |
| taxation (GBP'm) | | |
+--------------------------------------------------+-------------+-------------+
| | | |
+--------------------------------------------------+-------------+-------------+
| Weighted average number of potential ordinary | 137,411,598 | 92,976,552 |
| shares - diluted | | |
+--------------------------------------------------+-------------+-------------+
| | | |
+--------------------------------------------------+-------------+-------------+
| (Loss) / earnings per share (pence) | (29.3) | 7.2 |
+--------------------------------------------------+-------------+-------------+
| Post-tax finance costs of Convertible Notes | 1.9 | 2.2 |
| (pence) | | |
+--------------------------------------------------+-------------+-------------+
| Cost of exceptional items (pence) | 36.1 | 1.5 |
+--------------------------------------------------+-------------+-------------+
| Cost of other items excluding change in fair | 0.9 | 1.1 |
| value of derivative financial liability (pence) | | |
+--------------------------------------------------+-------------+-------------+
| Adjusted diluted earnings per share (pence) | 9.6 | 12.0 |
+--------------------------------------------------+-------------+-------------+
9.Equity dividends
The Directors do not recommend payment of a final dividend for the year ended 30
April 2009 (2008: 1.5 pence per share). No interim dividend was paid (2008: 1.0
pence per share) resulting in a total dividend of GBPnil for the year ended 30
April 2009 (2008: 2.5 pence per share).
10.Property, plant and equipment
+------------------------+--------------+-----------+-----------+----------+----------+
| | Leasehold | Computer | Fixtures | Motor | Total |
| | property and | equipment | and | vehicles | |
| | improvements | | fittings | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| | GBP'm | GBP'm | GBP'm | GBP'm | GBP'm |
+------------------------+--------------+-----------+-----------+----------+----------+
| Cost | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 1 May 2007 | 2.1 | 1.8 | 1.6 | 82.4 | 87.9 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Additions | 0.3 | 1.0 | 0.3 | 85.3 | 86.9 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Additions through | - | - | - | 0.2 | 0.2 |
| business combinations | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Transfer to assets | - | - | - | (0.5) | (0.5) |
| held for sale | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Disposals | - | (0.1) | - | (62.7) | (62.8) |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 30 April 2008 | 2.4 | 2.7 | 1.9 | 104.7 | 111.7 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Additions | 0.1 | 0.3 | 0.6 | 44.6 | 45.6 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Transfer to assets | - | - | - | (1.6) | (1.6) |
| held for sale | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Disposals | (0.2) | - | - | (61.9) | (62.1) |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 30 April 2009 | 2.3 | 3.0 | 2.5 | 85.8 | 93.6 |
+------------------------+--------------+-----------+-----------+----------+----------+
| | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Depreciation | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 1 May 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 | - | - | - | (0.2) | (0.2) |
| held for sale | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Disposals | - | - | - | (19.2) | (19.2) |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 30 April 2008 | 0.3 | 1.4 | 0.8 | 15.5 | 18.0 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Charge for the year | 0.2 | 0.8 | 0.6 | 19.5 | 21.1 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Impairment | - | - | - | 19.6 | 19.6 |
+------------------------+--------------+-----------+-----------+----------+----------+
| Transfer to assets | - | - | - | (0.6) | (0.6) |
| held for sale | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Disposals | - | - | - | (26.7) | (26.7) |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 30 April 2009 | 0.5 | 2.2 | 1.4 | 27.3 | 31.4 |
+------------------------+--------------+-----------+-----------+----------+----------+
| | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| Net book value | | | | | |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 30 April 2009 | 1.8 | 0.8 | 1.1 | 58.5 | 62.2 |
+------------------------+--------------+-----------+-----------+----------+----------+
| At 30 April 2008 | 2.1 | 1.3 | 1.1 | 89.2 | 93.7 |
+------------------------+--------------+-----------+-----------+----------+----------+
11.Trade and other receivables
+-----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+-----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+-----------------------------------------------------+------------+------------+
| | | Restated |
| | | (note 2) |
+-----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+-----------------------------------------------------+------------+------------+
| Trade receivables | 119.5 | 107.1 |
+-----------------------------------------------------+------------+------------+
| Exceptional Settlement Adjustment | (27.4) | - |
+-----------------------------------------------------+------------+------------+
| Trade receivables - net | 92.1 | 107.1 |
+-----------------------------------------------------+------------+------------+
| Other receivables | 2.3 | 0.4 |
+-----------------------------------------------------+------------+------------+
| Prepayments and accrued income | 2.6 | 2.4 |
+-----------------------------------------------------+------------+------------+
| | 97.0 | 109.9 |
+-----------------------------------------------------+------------+------------+
11. Trade and other receivables (continued)
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. Further details of the Exceptional Settlement
Adjustment are set out in note 4.
Credit risk
Credit risk arises on trade receivables due to their magnitude and the nature of
the claims settlement process. The Group recovers its charges for vehicle hire
and the costs of repair of customers' vehicles from the insurer of the fault
party to the associated accident or, in a minority of claims, from the fault
party direct where they are a self insuring organisation. However, claims
against motor insurance companies or self insuring organisations can be subject
to dispute which may result in financial loss to the Group.
The Group manages this risk by ensuring that vehicles are only placed on hire
and repairs to customers' vehicles carried out after a validation process that
ensures to the Group's satisfaction that liability for the accident rests with
another party. In the normal course of its business, the Group uses two
principal methods to conclude claims: by negotiation with the insurer of the
at-fault party and where a claim fails to settle within 120 days of billing, by
litigation. A large proportion of these claims settle before or on the threat of
litigation, but where they do not, formal proceedings are issued.
As trade receivables carry no contractual "due date" the term "past due" used in
IFRS 7 is not considered relevant in the Group's circumstances and does not
reflect the manner in which the Board considers credit risk. The Board reviews
trade receivables 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. The Group
now targets the transfer of trade receivables from the in-house to the solicitor
process when they are aged 120 days. An analysis of trade receivables based on
these classifications is given below:
+-------------------------------------+------------+--------+-----------+--------+
| | 30 April | | 30 April | |
+-------------------------------------+------------+--------+-----------+--------+
| | 2009 | | 2008 | |
+-------------------------------------+------------+--------+-----------+--------+
| | | | Restated | |
| | | | (note 2) | |
+-------------------------------------+------------+--------+-----------+--------+
| | GBP'm | % | GBP'm | % |
+-------------------------------------+------------+--------+-----------+--------+
| Between 1 and 120 days old | | | | |
+-------------------------------------+------------+--------+-----------+--------+
| In-House | 30.3 | 90% | 41.0 | 99% |
+-------------------------------------+------------+--------+-----------+--------+
| At Solicitors | | | | |
+-------------------------------------+------------+--------+-----------+--------+
| Pre-Issue | 3.0 | 9% | 0.5 | 1% |
+-------------------------------------+------------+--------+-----------+--------+
| Proceedings Issued | 0.4 | 1% | 0.1 | 0% |
+-------------------------------------+------------+--------+-----------+--------+
| | 33.7 | 100% | 41.6 | 100% |
+-------------------------------------+------------+--------+-----------+--------+
| More than 120 days old | | | | |
+-------------------------------------+------------+--------+-----------+--------+
| In-House | 34.0 | 37% | 25.4 | 36% |
+-------------------------------------+------------+--------+-----------+--------+
| At Solicitors | | | | |
+-------------------------------------+------------+--------+-----------+--------+
| Pre-Issue | 23.7 | 26% | 17.7 | 26% |
+-------------------------------------+------------+--------+-----------+--------+
| Proceedings Issued | 33.2 | 37% | 26.2 | 38% |
+-------------------------------------+------------+--------+-----------+--------+
| | 90.9 | 100% | 69.3 | 100% |
+-------------------------------------+------------+--------+-----------+--------+
| Total before impairment | | | | |
+-------------------------------------+------------+--------+-----------+--------+
| In-House | 64.3 | 52% | 66.4 | 60% |
+-------------------------------------+------------+--------+-----------+--------+
| At Solicitors | | | | |
+-------------------------------------+------------+--------+-----------+--------+
| Pre-Issue | 26.7 | 21% | 18.2 | 16% |
+-------------------------------------+------------+--------+-----------+--------+
| Proceedings Issued | 33.6 | 27% | 26.3 | 24% |
+-------------------------------------+------------+--------+-----------+--------+
| | 124.6 | 100% | 110.9 | 100% |
+-------------------------------------+------------+--------+-----------+--------+
| IAS 39 effective interest deduction | (5.1) | - | (3.8) | - |
+-------------------------------------+------------+--------+-----------+--------+
| Exceptional Settlement Adjustment | (27.4) | - | - | - |
+-------------------------------------+------------+--------+-----------+--------+
| | 92.1 | - | 107.1 | - |
+-------------------------------------+------------+--------+-----------+--------+
12.Non-current assets held for sale
At 30 April 2009, the Group had designated GBP1.0 million (2008: GBP0.3 million)
of motor vehicles at net book value as 'available for sale' and was actively
seeking buyers for those vehicles. These vehicles, which were sold soon after
the balance sheet date, were expected to realise their carrying value and,
accordingly, no gain or loss was recognised upon their transfer to current
assets.
13.Financial liabilities
Borrowings
Details of borrowings are as follows:
+------------------------------------------------+--------------+-------------+
| | 30 April | 30 April |
+------------------------------------------------+--------------+-------------+
| | 2009 | 2008 |
+------------------------------------------------+--------------+-------------+
| | GBP'm | GBP'm |
+------------------------------------------------+--------------+-------------+
| Current | | |
+------------------------------------------------+--------------+-------------+
| Bank loans | 0.4 | 0.5 |
+------------------------------------------------+--------------+-------------+
| Finance lease obligations | 45.9 | 38.5 |
+------------------------------------------------+--------------+-------------+
| | 46.3 | 39.0 |
+------------------------------------------------+--------------+-------------+
| Non-current | | |
+------------------------------------------------+--------------+-------------+
| Bank loans | 40.6 | 30.5 |
+------------------------------------------------+--------------+-------------+
| Finance lease obligations | 29.6 | 58.8 |
+------------------------------------------------+--------------+-------------+
| Convertible Notes | 50.5 | 47.7 |
+------------------------------------------------+--------------+-------------+
| | 120.7 | 137.0 |
+------------------------------------------------+--------------+-------------+
| Total borrowings | 167.0 | 176.0 |
+------------------------------------------------+--------------+-------------+
Revolving credit facility and bank loans
The Company has a senior secured credit facility with Morgan Stanley Bank
International Limited in respect of banking facilities of up to GBP40.0 million
("Facility") maturing on 30 September 2010. The Facility comprises a term loan
of GBP30.0 million and a GBP10.0 million revolving credit facility on which
interest is charged at LIBOR plus 5%. The Facility is secured by a fixed and
floating charge over certain of the Company's and its subsidiary undertakings'
assets.
Bank loans of GBP41.0 million as at 30 April 2009 comprise GBP40.0 million drawn
down from the Facility (2008: GBP30.0 million) and a GBP1.8 million (2008:
GBP2.2 million) five year term loan in relation to leasehold property
improvements at the Company's Alpha 1 headquarters, which are stated net of
aggregate unamortised issue costs of GBP0.8 million (GBP0.4 million was
amortised during the year through finance costs). The average effective interest
rate for the year on these banking facilities and loans was 10.2% (2008: 10.5%).
Convertible Notes
On 8 January 2008 the Group issued GBP50.0 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 GBP46.6 million net of
associated expenses of GBP3.4 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).
As set out in the Company's notice of extraordinary general meeting dated 7
December 2007 and in accordance with the terms and conditions of the Convertible
Notes contained in the offering circular dated 4 January 2008 (copies of each
being available on the Company's website), the conversion price of the
Convertible Notes was subject to adjustment on the first anniversary of their
issue. Accordingly, on 9 January 2009 the conversion price was adjusted to 75.4
pence per ordinary share.
13. Financial liabilities (continued)
Convertible Notes (continued)
Holders of the Convertible Notes may convert the Convertible Notes into ordinary
shares at the above conversion price at any time until the date falling 14 days
prior to 8 January 2013. 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 GBP50,000
principal amount then still outstanding, GBP63,286 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 liability component initially recognised upon issue of the Convertible Notes
was as follows:
+----------------------------------------------------------------+------------+
| | GBP'm |
+----------------------------------------------------------------+------------+
| Face value of Convertible Notes issued on 8 January 2008 | 50.0 |
+----------------------------------------------------------------+------------+
| Equity conversion option component (see below) | (0.6) |
+----------------------------------------------------------------+------------+
| Issue costs | (3.4) |
+----------------------------------------------------------------+------------+
| Liability component upon issue | 46.0 |
+----------------------------------------------------------------+------------+
The amount recognised in the balance sheet in relation to the Convertible Notes
is as follows:
+----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+----------------------------------------------------+------------+------------+
| At 1 May | 47.7 | - |
+----------------------------------------------------+------------+------------+
| Liability component recognised upon issue | - | 46.0 |
+----------------------------------------------------+------------+------------+
| Finance charges accrued (note 7) | 5.6 | 1.7 |
+----------------------------------------------------+------------+------------+
| Finance charges paid | (2.8) | - |
+----------------------------------------------------+------------+------------+
| Liability component at 30 April | 50.5 | 47.7 |
+----------------------------------------------------+------------+------------+
Derivative financial liabilities
Details of derivative financial liabilities are as follows:
+----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+----------------------------------------------------+------------+------------+
| At 1 May | 1.5 | - |
+----------------------------------------------------+------------+------------+
| Recognised upon issue of Convertible Notes | - | 0.6 |
+----------------------------------------------------+------------+------------+
| Movement in fair value during the year | (1.5) | 0.9 |
+----------------------------------------------------+------------+------------+
| At 30 April | - | 1.5 |
+----------------------------------------------------+------------+------------+
14.Deferred tax
The movement in the Group's deferred tax liabilities is shown below:
+----------------------------------------------------------------+------------+
| | Restated |
| | (note 2) |
+----------------------------------------------------------------+------------+
| | GBP'm |
+----------------------------------------------------------------+------------+
| At 1 May 2007 | 4.7 |
+----------------------------------------------------------------+------------+
| Prior year adjustment (note 2) | (0.6) |
+----------------------------------------------------------------+------------+
| Credited to the income statement | (0.8) |
+----------------------------------------------------------------+------------+
| At 30 April 2008 | 3.3 |
+----------------------------------------------------------------+------------+
| Credited to the income statement | (11.5) |
+----------------------------------------------------------------+------------+
| Deferred tax asset recognised | 8.2 |
+----------------------------------------------------------------+------------+
| At 30 April 2009 | - |
+----------------------------------------------------------------+------------+
Deferred tax is calculated in full on temporary differences under the liability
method using a tax rate of 28% (2008: 28%). The liability, which is
undiscounted, is analysed below:
+----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------+------------+------------+
| | | Restated |
| | | (note 2) |
+----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+----------------------------------------------------+------------+------------+
| Accelerated capital allowances | (2.2) | 3.9 |
+----------------------------------------------------+------------+------------+
| Tax losses | (6.7) | - |
+----------------------------------------------------+------------+------------+
| Other timing differences | 0.7 | (0.6) |
+----------------------------------------------------+------------+------------+
| Undiscounted deferred tax (asset) / liability | (8.2) | 3.3 |
+----------------------------------------------------+------------+------------+
The Group has recognised an asset of GBP6.7 million in respect of tax losses
(2008: GBPnil) that are available for offset against future tax charges of the
company in which they arose. The Group has an expectation that taxable profits
will be generated in future years and has accordingly recognised a deferred tax
asset of GBP6.7 million (2008: GBPnil) in respect of the losses.
15.Share capital
+----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+----------------------------------------------------+------------+------------+
| Authorised | | |
+----------------------------------------------------+------------+------------+
| 200,000,000 ordinary shares of 5p | 10.0 | 10.0 |
+----------------------------------------------------+------------+------------+
| | | |
+----------------------------------------------------+------------+------------+
| Allotted, issued and fully paid | | |
+----------------------------------------------------+------------+------------+
| 71,138,544 ordinary shares of 5p | 3.6 | 3.6 |
+----------------------------------------------------+------------+------------+
Purchase of own shares
On 16 July 2008 the trustee of the Group's Long Term Incentive Plan ("'LTIP")
acquired 200,000 ordinary shares of 5p each at a price of 55.4 pence per
ordinary share. These ordinary shares were purchased to hedge the liability of
previous awards made under the LTIP. The total holding of the LTIP following
this transaction is 200,000 Ordinary Shares, equating to 0.28% of the Company's
issued share capital.
Convertible Notes
The Group has GBP50.0 million of Convertible Notes in issue, which carry a
conversion price of 75.4 pence per ordinary share. Further details are given in
note 13.
16.Cash generated from operations
Reconciliation of net profit to cash generated from operations:
+----------------------------------------------------+------------+------------+
| | Year | Year |
+----------------------------------------------------+------------+------------+
| | ended | ended |
+----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------+------------+------------+
| | | Restated |
| | | (note 2) |
+----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+----------------------------------------------------+------------+------------+
| (Loss) / profit for the year | (40.2) | 6.7 |
+----------------------------------------------------+------------+------------+
| Depreciation and other non-cash items: | | |
+----------------------------------------------------+------------+------------+
| Depreciation | 21.1 | 23.4 |
+----------------------------------------------------+------------+------------+
| Fleet impairment | 19.6 | - |
+----------------------------------------------------+------------+------------+
| (Profit) / loss on disposal of vehicles, plant | (1.1) | 1.3 |
| and equipment | | |
+----------------------------------------------------+------------+------------+
| Amortisation of intangible assets | 0.6 | 0.6 |
+----------------------------------------------------+------------+------------+
| Share based payments | 0.9 | 0.6 |
+----------------------------------------------------+------------+------------+
| Changes in working capital: | | |
+----------------------------------------------------+------------+------------+
| Decrease / (increase) in trade and other | 14.4 | (44.8) |
| receivables | | |
+----------------------------------------------------+------------+------------+
| Decrease in claims in progress | 5.1 | 0.5 |
+----------------------------------------------------+------------+------------+
| Increase in payables | 5.5 | 4.5 |
+----------------------------------------------------+------------+------------+
| VAT recovered on fleet additions | 8.2 | 15.9 |
+----------------------------------------------------+------------+------------+
| Finance income | (0.5) | (0.8) |
+----------------------------------------------------+------------+------------+
| Finance costs | 17.3 | 12.9 |
+----------------------------------------------------+------------+------------+
| Change in fair value of derivative financial | (1.5) | 0.9 |
| liability | | |
+----------------------------------------------------+------------+------------+
| Tax | (15.2) | 3.2 |
+----------------------------------------------------+------------+------------+
| Cash generated from operations | 34.2 | 24.9 |
+----------------------------------------------------+------------+------------+
17.Reconciliation of cash and cash equivalents to net borrowings
+----------------------------------------------------+------------+------------+
| | Year | Year |
+----------------------------------------------------+------------+------------+
| | ended | ended |
+----------------------------------------------------+------------+------------+
| | 30 April | 30 April |
+----------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+----------------------------------------------------+------------+------------+
| | GBP'm | GBP'm |
+----------------------------------------------------+------------+------------+
| (Decrease) / increase in cash and cash equivalents | (9.8) | 20.1 |
| in the period | | |
+----------------------------------------------------+------------+------------+
| Capital element of finance lease payments | 75.1 | 81.8 |
+----------------------------------------------------+------------+------------+
| Proceeds from issue of Convertible Notes net of | - | (46.6) |
| issue costs | | |
+----------------------------------------------------+------------+------------+
| Proceeds from borrowings | (10.0) | (33.9) |
+----------------------------------------------------+------------+------------+
| Repayment of borrowings | 0.4 | 30.1 |
+----------------------------------------------------+------------+------------+
| Decrease in net borrowings resulting from cash | 55.7 | 51.5 |
| flows | | |
+----------------------------------------------------+------------+------------+
| Inception of finance leases | (53.3) | (101.9) |
+----------------------------------------------------+------------+------------+
| Increase in accrued Convertible Notes interest | (2.1) | (1.7) |
| included in net debt | | |
+----------------------------------------------------+------------+------------+
| Derivative financial liability excluded from net | - | 0.6 |
| debt | | |
+----------------------------------------------------+------------+------------+
| Amortisation of debt issue costs | (1.1) | (0.7) |
+----------------------------------------------------+------------+------------+
| Borrowings acquired with subsidiary | - | (0.2) |
+----------------------------------------------------+------------+------------+
| Increase in net borrowings during the period | (0.8) | (52.4) |
+----------------------------------------------------+------------+------------+
| Net borrowings at 1 May | (149.0) | (96.6) |
+----------------------------------------------------+------------+------------+
| Net borrowings at 30 April | (149.8) | (149.0) |
+----------------------------------------------------+------------+------------+
18.Analysis of movement in net borrowings
+--------------------------+-------------+-------------+------------+------------+
| | As at | | | As at |
+--------------------------+-------------+-------------+------------+------------+
| | 1 May | | Non-cash | 30 April |
+--------------------------+-------------+-------------+------------+------------+
| | 2008 | Cash flows | items | 2009 |
+--------------------------+-------------+-------------+------------+------------+
| | GBP'm | GBP'm | GBP'm | GBP'm |
+--------------------------+-------------+-------------+------------+------------+
| Cash and cash | 27.0 | (9.8) | - | 17.2 |
| equivalents | | | | |
+--------------------------+-------------+-------------+------------+------------+
| Other bank loans | (31.0) | (9.6) | (0.4) | (41.0) |
+--------------------------+-------------+-------------+------------+------------+
| Finance leases | (97.3) | 75.1 | (53.3) | (75.5) |
+--------------------------+-------------+-------------+------------+------------+
| Convertible Notes | (47.7) | - | (2.8) | (50.5) |
+--------------------------+-------------+-------------+------------+------------+
| Net borrowings | (149.0) | 55.7 | (56.5) | (149.8) |
+--------------------------+-------------+-------------+------------+------------+
19.Capital commitments
At 30 April 2009 the Group is not committed to any future investments or capital
expenditure plans other than the acquisition of vehicles under finance lease
arrangements in the normal course of business.
Capital commitments relate to the replacement of some existing motor vehicles
and the purchase of new motor vehicles. The purchase of new motor vehicles is
contingent upon specific motor dealers operating an exclusive relationship with
Accident Exchange Limited in respect of the introduction of credit hire claims
involving their customers.
Included in capital commitments due within one year are confirmed orders for
motor vehicles amounting to GBP1.3 million (2008: GBP12.4 million) ordered in
the normal course of business, which are not contingent on an exclusive
relationship being upheld.
Capital commitments for motor vehicles at the year end, which are contingent
upon an exclusive relationship being upheld by our referring partners and on the
maximum expected referral volumes being received from each referrer are analysed
as follows:
+---------------------------------------------------+------------+-------------+
| | 30 April | 30 April |
+---------------------------------------------------+------------+-------------+
| | 2009 | 2008 |
+---------------------------------------------------+------------+-------------+
| | GBP'm | GBP'm |
+---------------------------------------------------+------------+-------------+
| In one year or less | 18.7 | 85.1 |
+---------------------------------------------------+------------+-------------+
| Between one and five years | 11.6 | 16.3 |
+---------------------------------------------------+------------+-------------+
| | 30.3 | 101.4 |
+---------------------------------------------------+------------+-------------+
20.Other information
The financial information in this results announcement does not constitute
statutory accounts within the meaning of Section 435 of the Companies Act 2006
but has been extracted from statutory accounts. The statutory accounts for the
year ended 30 April 2008 have been filed with the Registrar of Companies and
those for the year ended 30 April 2009 will be published and filed in due
course.
The auditors' reports on the statutory accounts for the year ended 30 April 2008
and for the year ended 30 April 2009 were unqualified and do not contain a
statement under Sections 498 (2) or (3) of the Companies Act 2006, however for
the year ended 30 April 2009 the auditors' report included reference to matters
to which the auditors drew attention by way of emphasis of matter without
qualifying the report. The matters referred to in the auditors' report relating
to going concern and settlement estimation are described in note 1 'Basis of
preparation' and these matters indicate the existence of material uncertainties.
Whilst the financial information included in this results announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs), this results announcement
does not itself contain sufficient information to comply with IFRSs. The Group's
full financial statements for the year ended 30 April 2009 will be posted to
shareholders and delivered to the Registrar of Companies in due course. Copies
will be available from the Company Secretary, Alpha 1, Canton Lane, Hams Hall,
Birmingham, B46 1GA or from the Group's website www.accidentexchange.com.
20.Other information (continued)
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 Thursday
17 September 2009.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RPMMTMMMTTBL
|