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Accident Exchange (~268)

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Friday 19 March, 2010

Accident Exchange

Interim Management Statement

RNS Number : 8348I
Accident Exchange Group PLC
19 March 2010
 



  

FOR IMMEDIATE RELEASE

19 March 2010

  

 

Accident Exchange Group Plc

("Accident Exchange" or the "Group")

 

  

INTERIM MANAGEMENT STATEMENT

AND

AUTOFOCUS UPDATE

  

The Board of Directors of Accident Exchange is today releasing its Interim Management Statement for the trading period from 1 November 2009 to 28 February 2010.  There have also been significant recent developments in the legal actions against Autofocus Limited ("Autofocus") and certain of its former employees.  A detailed update on these issues is included below.

 

 

Strategic refocus and cost reductions

 

Actions to deliver the previously announced £24 million annualised savings referred to in the Interim Report released in December 2009 ("Interim Report") have progressed well over the last three months.  The consultation process with staff concluded recently and headcount has been reduced by 275 to 458 at 28 February 2010 from 733 at 31 October 2009.  Fleet volumes have been reduced by 1,418 vehicles to 3,240 at 28 February 2010 from 4,658 at 31 October 2009 with sale proceeds attained in line with expectations.  A further reduction in the size of the fleet of c.700 vehicles is planned over the next three months and this will conclude the delivery of the cost savings referenced above. 

 

 

Working capital and net debt

 

The Group has strengthened working capital management over recent months and cash at bank has improved to £4.9 million as at 28 February 2010 from £2.9 million as at 31 October 2009.

 

Vehicle finance debt has decreased by 37% to £34.1 million as at 28 February 2010 compared to £54.2 million as at 31 October 2009.

 

Including the £50.0 million convertible loan notes due January 2013 and the £40.0 million Morgan Stanley Facility due September 2010, total net debt (net of unamortised debt issue costs) has reduced by 15% to £122.9 million as at 28 February 2010 from £144.3 million as at 31 October 2009.

 

 

Financing

 

Following what has been a difficult period for the business, but having significantly restructured the cost base and reduced the projected working capital needs of the business, the Group remains engaged in a review of its financial structure with its principal banker and asset backed lenders.  With the support of Morgan Stanley and an adjustment to their terms, the Group has not breached any banking covenants.  Future covenant compliance will require ongoing flexibility from Morgan Stanley whilst refinancing discussions continue.

 

 

Trading and debtor settlements

 

Reflecting both the continuing macroeconomic environment where reduced traffic volumes have led to reduced accident frequency, and the understandable impact that the planned strategic refocus and downsizing has had on the morale and focus of our team over the last 90 days or so, rental days for the four months ended 28 February 2010 were down materially at 251,000 (2009: 367,000).  The Group has not been operating profitably during the period under review.  The Board believes that with a leaner and more focused business that, if the refinancing of the Morgan Stanley Facility and asset backed lending facilities can be concluded satisfactorily, that referral volumes can be returned to profitable levels.

 

The level of settlement adjustments conceded to drive cash collections have continued at the higher levels referred to in the Interim Report for most of the four month period but are showing signs of improvement more recently.  The proceedings against both Autofocus and former employees of Autofocus continue and a fuller update is given below.  The Board expects settlement adjustments to reduce over time given the findings of fact already obtained and expected to be attained against Autofocus, offset potentially by the risk of having to continue to concede higher settlement adjustments to ensure cash collections meet required levels.

 

 

Autofocus

 

As a consequence of the announcements relating to the discovery of dishonest evidence from employees of Autofocus in September 2009, the Group has enjoyed improving relationships and has negotiated more efficient settlement protocols with a number of insurers and solicitors acting on their behalf.  A limited number of larger well known insurers and their solicitors have, however, remained supportive of Autofocus and persevered with their evidence in an attempt to reduce the recoverability of our hire charges.

 

As previously reported, the Group was successful in obtaining permission from HHJ Waine in the Chesterfield County Court to commence committal proceedings against two former employees of Autofocus in respect of their submission of dishonest evidence in the cases of Glossop v Salvesen Logistics and MB Glass v Den Boon.  The action against one of these former employees has been stayed on the basis that she has given Undertakings to the Court which involve her co-operating with Accident Exchange and providing evidential support in respect of the principal action against Autofocus in the High Court.  The committal hearing in respect of the second former employee, Helen Whyshall, was heard in the Northampton County Court on 15 March 2010 before HHJ Waine.  It is a matter of public record that Helen Whyshall admitted that she was in contempt of court by verifying a witness statement for use in proceedings with a statement of truth when it was false to her knowledge or when she did not believe it to be true. Miss Whyshall informed the court that she was also guilty of three further similar contempts of court.        

 

HHJ Waine imposed an order committing her to prison for 28 days and ordered her to pay costs. In mitigation Helen Whyshall said, through her counsel, that she was a relatively senior employee of Autofocus at the time of her contempts. She said that she took part in a system whereby she signed off reports which were in fact prepared by someone else and that she did so with the consent of a Director [of Autofocus]. She said that the bonus arrangement was such that she was paid additional income depending on the number of reports she produced. She said that she had ceased to be employed by Autofocus in September 2009. Her prison sentence was suspended for 12 months based on her honesty in admitting the offences.

 

The Group has also received permission from the Court of Appeal this week giving leave to appeal "out of time", based on evidence discovered after the trial was heard, in the case of Archer v Skanska Corporation. This was the case in August 2009 where our initial suspicions around the evidence given by an employee of Autofocus were triggered and where we did not recover our hire charges at the levels expected because of the submissions in Court by Autofocus. The appeal has been flagged by the Court of Appeal as a case which they would like expedited.

 

With regard to the principal action for damages against Autofocus, Accident Exchange Limited issued proceedings against Autofocus in the High Court in October 2009 alleging deceit, conspiracy to cause harm by unlawful means and conspiracy to cause harm to our business. Autofocus made an application to the High Court to have the claim against them struck out because, they argued, they were protected by the principle of witness immunity. Mr Justice Mackie gave Judgment against them in respect of that application on 2 January 2010. In giving his Judgment, Mr Justice Mackie said:

 

"If the facts alleged by the Claimant [Accident Exchange Limited] are true, as I must assume for the purpose of this application, it has sustained financial loss as a result of disgraceful and dishonest conduct by the employees or agents of the Defendant [Autofocus]."

 

In light of the conclusion of the matter against Miss Whyshall and based on an increasing volume of direct evidence obtained elsewhere, it is now becoming increasingly evident that the matters complained of in the action against Autofocus are true. The case against Autofocus is listed to be next heard before the High Court on 31 March 2010.

 

The Group has commenced a forensic exercise to collate the total number of instances where Autofocus rate data procured by insurers or their solicitors was used to reduce the level of recovery made by the Group and where it is clear, in the Board's view, that the judgement can now be shown to be unsafe.  There are in excess of 6,500 cases where currently we believe Autofocus evidence has been deployed and, of those cases, approximately 2,650 where the case has been concluded. In light of the judicial finding of fact in Whyshall, and supported by the decision of the Court of Appeal to allow us to serve fresh evidence in cases that have been concluded on the basis of unsound Autofocus evidence, instructions will be issued to our panel solicitors to launch individual appeals on a number of cases commencing with those involving Miss Whyshall.

 

Early indications are that four large and well known insurers and two firms of defendant solicitors account for the most material number of instances where we have under recovered our hire charges as a result of what we believe to be the systematic production of fraudulently submitted hire rate data.  Discussions with those insurers about whether they wish to incur the incremental cost of re-opening those cases will be initiated shortly.

 

Ends

 

  

CONTACTS:

 

Accident Exchange Group Plc

Steve Evans, Chief Executive

08703-009 781

Martin Andrews, Group Finance Director

08703-009 781

Singer Capital Markets Limited

020-3205-7500

Shaun Dobson, Joint Head of Corporate Finance


Bankside

Steve Liebmann or Simon Bloomfield

020-7367-8883 / 07802-888159

 

 

 

 

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.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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