TIDMACE
RNS Number : 2013Z
Accident Exchange Group PLC
17 September 2009
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| FOR IMMEDIATE RELEASE | 17 September 2009 |
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Accident Exchange Group Plc
("Accident Exchange" or the "Group")
INTERIM MANAGEMENT STATEMENT
and
ANNUAL GENERAL MEETING CHAIRMAN'S STATEMENT
Accident Exchange has today released its Interim Management Statement and a
short address to be made by the Chairman to the Annual General Meeting today.
Included within this Interim Management Statement are details of the recent
discovery of evidence offered in Court against the Group which, the Board
believes, may not be honest and which it now considers also had a material
influence on the magnitude of the exceptional settlement adjustment provision
in the previously reported results for the year ended 30 April 2009.
Key points:
* Over recent months, through a process of litigation, Accident Exchange has been
successful in obtaining many judgements in their favour in respect of
outstanding car hire claims, but some of the recoveries have been at recovery
rates materially below those originally claimed by the Group.
* Accident Exchange has recently discovered and obtained direct independent
evidence that the lower rates awarded by the Courts were, in some cases, based
on the defendant producing evidence on spot hire rate from Autofocus Ltd.
("Autofocus") which, the Board believes, may either have been factually
incorrect or dishonest.
* The findings of the investigation have been communicated to the insurers and
solicitors of the 'at fault' driver (the defendant in these Court cases) and is
expected to form the basis of an action for damages against Autofocus.
CONTACTS:
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| Accident Exchange Group Plc | |
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| Steve Evans, Chief Executive | 08703-009 781 |
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| Martin Andrews, Group Finance | 08703-009 781 |
| Director | |
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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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| | |
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| Bankside | |
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| Steve Liebmann or Simon | 020-7367-8888 |
| Bloomfield | |
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Forward Looking Statements
This IMS contains certain forward-looking statements with respect to the
financial condition, results of operations, and businesses of Accident Exchange
Group Plc. These statements and forecasts involve risk, uncertainty and
assumptions because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors which could cause
actual results or developments to differ materially from those expressed or
implied by these forward-looking statements. These forward-looking statements
are made only as at the date of this announcement.Nothing in this announcement
should be construed as a profit forecast.Except as required by law, Accident
Exchange Group Plc has no obligation to update the forward-looking statements or
to correct any inaccuracies therein.
About Accident Exchange
Based in the West Midlands and with regional depots in Glasgow, Belfast,
Warrington and Dartford, Accident Exchange delivers accident management and
other solutions to automotive and insurance related sectors. Fully listed, the
stock code is LSE: ACE.
INTERIM MANAGEMENT STATEMENT
The Board of Directors ("Board") of Accident Exchange is today releasing its
Interim Management Statement for the trading period from 1 May 2009 to date.
Settlement Activity
As stated previously, the key priority for the Group is to improve cash
collections to break-even levels. We have yet to reach that point. However, the
Board has very recently obtained direct evidence that supports a conclusion that
certain evidence presented to the Courts by Autofocus on behalf of some
defendant insurers, in cases brought by our clients for the recovery of hire
charges, is untrue.
In the Board's view, this has been a material factor in the difficulties and
delay experienced by the Group in reaching cash flow break even.
The results of the investigation have now been filed with the Court in a number
of cases which involve the recovery of hire charges from the insurers of the 'at
fault' driver. These results also give rise to a separate action for damages
currently being formulated against Autofocus
Our concerns have been raised very recently with a number of UK motor insurers
and with a number of solicitors acting on behalf of those insurers.
Background
Hire claims which are litigated will, if the claim is decided in our client's
favour, result in an award for hire charges. The awarded hire charges are
usually calculated at our commercial rate in instances where the client is
impecunious or, if he is not, calculated at the market 'spot rate'.
Evidence of the spot hire rate is usually gathered by surveying local rental
companies to determine whether they have an equivalent vehicle to that hired on
fleet, whether it was available at the relevant time and at what rate it would
be charged at including all additional charges.
For many of the rental vehicles operated by the Group (particularly prestige
vehicles) and/or in many geographical locations there is a limited
available market for the rental of vehicles. This makes the spot hire rate for
equivalent available vehicles difficult or even impossible to ascertain.
Over the last nine months, insurers and a large number of solicitors acting for
insurers, have increasingly used Autofocus to submit reports as to the spot
rates in individual cases in an attempt to challenge the commercial rates
charged by credit hire companies such as us. Typically, these reports are
transformed into witness statements supported by a declaration of truth and are
submitted to the Courts as evidence of the spot hire rate which the insurer of
the 'at fault' driver alleges the Court should award. It is right to expect
that any such report properly identifies a number of suppliers locally who were
in existence at the material time, had the vehicles available to hire from their
fleet at the relevant time and who were capable of hiring the vehicle in
question to a retail customer at an identified rate. If diligence has not been
applied to the enquiries carried out in the market survey, there is a risk that
evidence before the Courts will be unreliable.
Testimony given by employees of Autofocus on spot rates has been accepted by the
Courts with increasing frequency over the past nine months. At the same time,
the acceptance of that evidence has impacted the percentage recovery level of
the Group's commercial hire charges arising from claims settled in litigation.
The Board now believes that this issue was a contributory factor to both the
exceptional settlement adjustment reported in the financial statements for the
year ended 30 April 2009 and to the slower payment profiles arising with certain
insurers.
The investigation and evidence on spot hire rates
For some time the Group has undertaken its own review of the hire rates
available from traditional rental companies to ensure that our charges are in
line with those spot hire rates. Whilst it was clear to us that the Autofocus
reports did not always compare 'like-with-like' in terms of the rates applicable
for drivers with points on their licence, younger drivers and the various
insurance excess and waiver charges that might be applicable from a traditional
hire company, it was also clear that many traditional hire companies simply
could not supply certain categories of vehicles (for example, prestige models)
or that the rates quoted were in marked contrast to those quoted in Autofocus
reports. This led us to question the accuracy of the Autofocus submissions.
Following a rapid investigation which commenced on 27 August 2009, the Board has
obtained a substantial amount of direct evidence which supports the conclusion
that some of the evidence submitted on behalf of defendant insurers in order to
challenge the Group's hire charges is, at best, factually incorrect and, at
worst, dishonest. These are very grave allegations which were first made before
the Court in the case of Glossop vs. Christian Salvesen Logistics on 8 September
2009. The allegations, supported by further evidence obtained by the Group as a
result of its ongoing investigation, are being deployed on a case by case basis
where there are concerns about the veracity of the submissions made by
Autofocus.
The Group is now also in the process of taking more formal steps in the High
Court to secure pre-action disclosure from Autofocus as part of an action for
damages. The action may be extended to a number of individuals employed by
Autofocus.
Commercial Actions
Very recently the Group has communicated its concerns around these issues to a
number of insurance companies who engaged Autofocus. The Group is in discussion
with one leading insurer as to how they intend to react to the Board's concerns
and is awaiting a response from several others.
The Group has also communicated its concerns to a number of solicitors acting
for insurers, three of whom have now had full disclosure of the evidence
obtained as a result of our investigation in respect of specific cases in which
they are instructed by the insurer of the 'at fault' driver.
In addition, the Group continues to make enquiries in respect of
evidence adduced by Autofocus in other cases currently in litigation and will
also be investigating the extent of previously closed cases which were closed
with an under-recovery and where Autofocus rate evidence can be demonstrated to
have influenced negatively the recovery of hire charges.
Working Capital
The Group continued to report covenant compliance at the last quarterly testing
date of 31 July 2009. In addition, the Board continues to manage its working
capital in the face of the issues set out above and to engage in discussions
with its bankers and fleet finance providers, to seek to ensure that the
facilities available to it are sufficient to support the ongoing operations of
the Group.
Given the issues set out above and, although the Board has financial projections
that show the Group can continue to operate within its currently available
facilities, as narrated in the year end results announcement, there continues to
exist a material uncertainty that collection and settlement levels may be higher
or lower than the Board currently anticipates and to the extent they are lower,
further uncertainty would arise as to the Group's ability to meet the covenants
set out in and operate within its current working capital facilities.
Trading
Rental day information
Rental days for the four months ended 31 August 2009 were in line with the
comparative period at 396,000 and were 15% higher than the preceding four months
ended 30 April 2009 (344,000 days).
The trend of increasing mainstream rental days (which are of lower value and
lower margin) as a proportion of the total continued over the period such that
mainstream rental days comprised 58% of the total as compared to 45% in the
comparative period and 53% in the preceding four months ended 30 April 2009.
ANNUAL GENERAL MEETING CHAIRMAN'S STATEMENT
At the Annual General Meeting being held today, David Galloway, will also make
the following statement.
"We have stated previously that improvement to cash collections is our biggest
priority. We did not expect that challenge to include having to deal with the
considerable issues outlined above but we expect insurers and solicitors who
have been inadvertently exposed to this situation to react with the integrity
and affirmative action which their stakeholders would expect of their brand.
"The Board retains an unremitting determination to see justice prevail and for
the Group to emerge from these considerable issues and to continue to operate
within available working capital facilities."
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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