AccEx blames ‘perfect storm’
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Accident Exchange blamed a “perfect storm”, including tumbling second-hand car values, for a £55.4m ($90.8m) annual pre-tax loss.
Steve Evans, chief executive, who has a 45 per cent stake in the vehicle accident management group, said the credit crunch had not only impaired the value of the hire fleet but had also led to insurers conserving cash rather than paying out on claims. Several insurance companies were owned by banks such as RBS, which themselves had required millions of taxpayers’ cash to survive.
New car registrations had fallen, as had traffic volumes and accident rates. So the length of time cars were rented to the victims of “no-fault” accidents had fallen, because their own damaged cars were being repaired more quickly.
Accident Exchange had tantalisingly come close to break-even on cash collections in the first quarter, he said, but that had ebbed away in the second half.
Underlying revenue had risen more than £5m to £167m, and the number of rental days had been maintained at 1.1m. But in order to improve cash collection the company had granted discounted rates to some insurers, leaving actual revenue at £132m for the year to April 30 compared with £162m previously. Last year’s pre-tax profit of £9.9m became a £55.4m loss.
In addition, the company had moved away from its traditional service for the owners of prestige and luxury cars to more mainstream vehicles, which generated lower margins.
Cash collected via litigation rose from £14.1m to £31.8m. There were 14,200 claims with solicitors, including 5,700 sent since the year end. But the company was confident many claims would be met without resort to the courts, otherwise the insurers would rack up £80m in legal costs.
Nevertheless, the company had written off £16.3m of debtor impairment and had set aside a further £27.7m in provisions against possible discounts on future revenues.
● FT Comment
A sea of red ink flooded through this complex set of accounts. However, the basic facts are stark. The shares closed down 2¼p at 14¼p, giving the company a market capitalisation of about £10m. Net debt was £149.8m at the year end, when working capital headroom was £17m. Survival depends on sorting out the cash collection and avoiding the need to raise further funds.
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