Accident Exchange sees profits dip despite a revenue rise
Midland-based Accident Exchange, which provides accident management services to automotive and insurance companies, has posted lower full-year profits – despite seeing a 41 per cent hike in revenue.
Higher finance costs and costs associated with the issue of £50 million of convertible notes have been blamed for eating into profit margins.
For the year to April 30, 2008, the Coleshill company’s pre-tax profit fell to £12.1 million compared with £13.6 million a year earlier. Adjusted pre-tax fell to £16.1 million from £18 million.
Despite the results the company said it was looking to the future with optimism and planning to expand the business with the creation of around 100 new jobs.
The past year proved to be exceptionally difficult for the company as it set about recovering from the ramifications of an expensive legal challenge.
The issue revolved around challenges to older rental agreements made between 2004 and 2005, on the grounds that they were unenforceable and should not be paid.
The challenges slowed the collection of payments on claims being pursued by Accident Exchange, as some of the insurers delayed settlements due to the legal uncertainty.
The issue was resolved when a judge ruled in favour of one of Accident Exchange’s clients, which confirmed it was in the right.
However, the distractions caused by the row adversely affected trading levels, profitability and cash flows.
Chairman David Galloway said: “Enormous effort was expended dealing with the ramifications of and defeating the legal challenge to our terms and conditions of hire which started in late 2006 and which affected all aspects of the business, particularly our cash flow.”
Having defeated the challenge, the company set about recovering lost ground and heading off competitors by negotiating a £45 million working capital facility supplemented in January with the issue of the conversion notes.
Chief executive Steve Evans said recovering the company’s position had been difficult but it was testament to its business plan and the strength of the company that in the midst of a credit crunch it was able to generate £50 million of investment.
“Investors recognised the strength of the company and we believe the fundamentals of the business are solid,” he said.
Mr Evans said the resolve of staff to see through the difficulties had been significant and he paid tribute to their dedication.
“We were delighted that people stuck by us and now we 700 people totally focused on building for the future.
“We are also looking to expand on that and plan another 100 jobs to help with the development of the business,” he added.
The firm’s strategy is to continue improving cash receipts, improve margins and enhance its position as the supplier of choice to motor dealers and manufacturers.
It is also implementing new products and services, one being a strategic accident repair consultancy for car manufacturers.
This approach was one reason behind Bentley’s decision to engage the firm to provide strategic support for its global paint and body repair service. The company is now in discussions with other manufacturers to provide an equivalent service.
Accident Exchange has also implemented new anti-fraud software and introduced an online auction site for the disposal of its surplus rental fleet.
The rental fleet currently stands at around 5,000 units with a high proportion of prestige brands including Aston Martin, Audi, Bentley, BMW, Mercedes Benz and Porsche.
Mr Evans said plans were to possibly increase the size of the fleet by another 1,000 vehicles, depending on requirements.
The company will continue to work with dealers to try and improve services, he added.