ACE Auhua Clean

 

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

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| 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 GBP24 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 GBP4.9 million as at 28 February 2010 from GBP2.9 
million as at 31 October 2009. 
 
Vehicle finance debt has decreased by 37% to GBP34.1 million as at 28 February 
2010 compared to GBP54.2 million as at 31 October 2009. 
 
Including the GBP50.0 million convertible loan notes due January 2013 and the 
GBP40.0 million Morgan Stanley Facility due September 2010, total net debt (net 
of unamortised debt issue costs) has reduced by 15% to GBP122.9 million as at 28 
February 2010 from GBP144.3 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        |                      08703-009 781 | 
| Finance Director             |                                    | 
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|                              |                                    | 
+------------------------------+------------------------------------+ 
| Singer Capital Markets       |                      020-3205-7500 | 
| Limited                      |                                    | 
+------------------------------+------------------------------------+ 
| Shaun Dobson, Joint Head of  |                                    | 
| Corporate Finance            |                                    | 
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|                              |                                    | 
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| Bankside                     |                                    | 
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| Steve Liebmann or Simon      |       020-7367-8883 / 07802-888159 | 
| Bloomfield                   |                                    | 
+------------------------------+------------------------------------+ 
 
 
 
 
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 
   END 
 
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