Accident Exchange (Epic Code ACE) is a provider of replacement vehicles to motorists involved in accidents where they are not at fault. It specialises in the high margin prestige end of the market, and appears to be gaining market share in a growing marketplace.

Key Points are:

Full-year results show the company is growing
rapidly, albeit from a small base. Sales rose fivefold
during the year to 4.1m, and pre-tax profits registered
a near six-fold increase to 1.14m.

The current financial year has got off to a very good
start, with activity levels exceeding management
expectations by a significant margin.

Net debt at the year-end of 3.9m, giving a gearing
figure of 212% relates almost entirely to spending on
new vehicles so is asset backed. We expect gearing to
be down to 161% at end-April 2005 and to 107% at
end-April 2006.

Almost two-thirds of the companys business is with
companys that subscribe to the ABI GTA terms of
agreement, reducing the overall risk profile.

On the key financial metrics of fleet utilisation, gross margin
and ROC, Accident Exchange ranks at or near the best of its
peer group. On a PER of 9 times for the current y/e April 2005
falling to under 7 times 2006 earnings, based on conservative
estimates, the company looks attractively priced in comparison
to its peer group.

The current financial year has got off to a very good
start with excellent activity levels. Fleet numbers are
up to 330 vehicles, against our y/e April 2005
forecast of 385, the annualised run rate on sales is
currently 10m, and the annualised run rate on pretax
profit is 3m.

This company clearly has a very promising future
ahead of it.

Website:
http://www.accidentexchange.com/

Reseach Notes:
http://www.accidentexchange.com/research/EdisonOutlookNote-June04.pdf
http://www.accidentexchange.com/research/HardmanNote-June04.pdf

This is an excellent piece of research on Accident Exchange group that I have "borrowed" from another BB written by another poster for the benefit of anyone interested in investing in this company:
The Company

Accident Exchange plc (ACE) www.accidentexchange.com
AIM 61.6m shares

"Accident Exchange provides car hire on credit to motorists involved in accidents where they are not at fault. Accident Exchange has targeted the prestige vehicle end of the market and operates a fleet of vehicles comprising major prestige
marques. Accident Exchange then seeks to recover its hire charges from the insurer of the 'at fault' driver."

So ACE seeks out accidents, finds if there is a clear not-at-fault driver and offers them a replacement car, taking on the risk of recovering the charges from the third party (insurance). Fortunately, the principal is OK, and the insurance industry has agreed appropriate rates/payment periods etc.

Accident Exchange Limited reversed into AIM listed Xecutive Research in April 2004 and raised funds at 25p per share. http://www.uk-wire.com/cgi-bin/articles/200403241330028864W.html

As a consequence the results for Y/E 30/4/04: http://www.uk-wire.com/cgi-bin/articles/200406290700042233A.html
are pro-forma as explained by the Chairman and CEO.

According to the takeover document, the CEO (Steve Evans) started the company in 2001 and has been employed in the credit hire industry since 1983. Steve founded and grew a credit hire business which was one of the leading suppliers of credit hire in the sector at the time it was sold in 1997.

Accident Exchange has been profitable at the operating level since inception in 2001. For its reporting period to 30 April 2003, the Company achieved profits before tax of 169,000 on a turnover of 657,000. For the nine months to 31st January 2004, the comparable figures were 707,000 profit before tax on a
turnover of 2,379,000.

Growth continues apace in the latest results here are the key points which I noted:

Financial Highlights
- Turnover on a pro forma basis increased to 4.1million
- Profit before tax on a pro forma basis increased to 1.1million
- Strong growth in Q4 with 42% of pro forma revenue generated in final three months of year
- Consistently high level of fleet utilisation through the period (but see later!)
- Pro forma earnings per share of 1.2p
The Company anticipates declaring a dividend to shareholders in the future. It is unable to do so at the current time because there are no distributable reserves as a result of the accumulated loss brought forward from XecutiveResearch Group plc last year.

42% of our pro-forma revenue for the period May 2003 to April 2004 was actually generated in the final three months of this accounting period. This growth was achieved without any increase in staff numbers and with an on operational fleet
utilisation of 84% [err, see later!] during a period when the number of vehicle on fleet actually grew by 35%. These figures demonstrate the strength of our internal operational controls.

They are applying technology at many levels to make the system efficient for example they are tracking their cars so they know when the car is ready to be reassigned, rather than waiting for someone to tell them! (Big Brother lives OK!!)

Trading in the first two months of the new financial year has been significantly ahead of the same period last year.

Research Notes
ACE has two research notes on its website (probably both paid for!) Id recommend that anyone interesting in investing should read these, but beware that they are probably prepared with nice rose-tinted specs on!! Below, I have picked out a few points from each note.

(It is also rumoured (on ADVFN) that a brokers note is in preparation and due within 2 weeks. It will be interesting to read that note as a comparison to these two research notes.)
http://www.accidentexchange.com/research/EdisonOutlookNote-June04.pdf

Estimates @ SP=41.5p
4/05: Rev 12m PBT 3.6m EPS 4.4p PE 9.4 DPS 0.5p Yield 1.2%
4/06: Rev 18m PBT 5.2m EPS 6.2p PE 6.7 DPS 1p Yield 2.4%

42% of revenues were generated in the last Quarter of the year

Over the year the vehicle fleet was increased from 33 to 250 with over 90% utilization (now 330 at 28 June!) [err, that would be fantastic - see later!]

Gross margins improved from 61% to 67%

Market size 400 accidents per day involving prestige cars would need a fleet of 7600 vehicles to service and a revenue of 321m per year, so plenty of room for growth.

ACE allow for about 8% losses due to bad assessment currently running at 5.7%

Annualised run-rate for June indicates 9.7m T/O and 3m PBT. [I assume this is essentially just taking the June figures and multiplying by 12, but I may be wrong!]

Competitors:
Bristol & London are around the same size and in the same prestige market, listed on AIM in Sep 03, but have since issued a profit warning, citing increased competition.

Helphire about 10x size concentrating on mainstream vehicles have just reported good growth and are on a 2004 PER of 31!

And the other note: http://www.accidentexchange.com/research/HardmanNote-June04.pdf

Net debt at the year-end of 3.9m, giving a gearing figure of 212% relates almost entirely to spending on new vehicles so is asset backed. We expect gearing to be down to 161% at end-April 2005 and to 107% at end-April 2006.

On a PER of 9 times for the current y/e April 2005 falling to under 7 times 2006 earnings, based on conservative estimates, the company looks attractively priced in comparison to its peer group.

Weaknesses
- Still a small company so there is always a chance that major insurers will delay dealing with its complaints/making payments.
- Vulnerable to a fall in resale values of two year old prestige vehicles.

CEO and Founder. Steve Evans has over 19 years experience in the sector, and was previously CEO of Accident Assistance, a key player in the motor insurance claims industry before its successful sale to a subsidiary of GE Capital in 1996. He was also Group Marketing Director at United Kenning Rental Group.

Non-Executive Chairman. Lord Young of Graffham was a former Secretary of State for Trade & Industry under the Thatcher Government. He is currently Chairman of Pixology Plc, another recent entrant to the AIM market.

Finance Director. The resignation of former Finance Director Paul Wildes in April has led Non-Executive Director David John Lees to take up the role temporarily. David is a qualified Chartered Accountant with significant public company experience. He is currently Chairman of several junior companies, including Metis Plc. The company is well underway with successor to Wildes.

Other

Apparently GCI recently (end June?) made this stock a strong buy at 43p it blipped up and is now slipping back a little.

Shares Mag also gave it a favourable mention (last week?)

Concerns

The utilization figure is very important. One research note quotes over 90% (I think they mean in June) which is excellent/exceptional/almost unbelievable! The other note quotes 85%, but notes only 75% is you strip out loans of vehicles to garages etc. I feel much more comfortable with the 75% figure and could well believe that that blipped up to 80% (+10% loans) in June say, but these figures are key to financial success and need to be clarified and watched carefully.
(I suspect they loan 'spare' vehicles to garages for two reasons: (i)'thank you for business' and (ii) insurance ... I believe from a contact that ACE self-insure ... so they would rely on placing the cars with clients etc to get insurance cover ... but this is not confirmed!)

The FD left abruptly that is always a cause for concern!!

The Edison report notes that the allowance for interest payments in the AIM admission document was understated, but that they have used a better model. (Ive not looked into how serious that understatement was perhaps this was a reason for the FD leaving?!)

The handling of depreciation and interest (HP payments) seems a little confusing to me but that maybe just my lack of finance training.

I would also like to understand better how turnover can increase almost 3 times whilst interest and particularly depreciation double in the models put forward in the research note. I guess, Im a little nervous about the underlying assumptions for such an explosive growth.

Is the depreciation rate on their prestige cars realistic? They seem to be depreciating at 20% per year is 40% enough after two years? I think they may be protected against some of this by taking out the manufacturers HP agreement and returning after 2 years with nothing further to pay, but Im not sure thats the full story. And if they are unprotected resale values for ex-hire prestige cars might cause them a problem.

If ACE start to do too well, others may enter the market or the insurance industry may get tough but ACE should have time to get a good strong position before too long.

In general, the company seems very dependent on Steve (CEO), and they seem to be very bullish perhaps even to the level of promising more than they can deliver. Are they extrapolating an early growth curve too far?

Some calculations

First, some extrapolation! Based on the annual report we know that the final Quarter of last year did 42% of 4.1m = 1.7m so say 0.55m per month. And we know that June achieved 0.8m so lets take that as the average for the first Quarter. Thats impressive growth! If we followed a straight-line growth model we would get (average monthly turnover per Q of 0.8; 1.05; 1.3; 1.55 an average for the year of almost 1.2m per month, say 14m turnover. So on this basis, the research notes look to be conservative. (Growth is likely to be greater than straight line, based on the latest results, but lets not get too carried away yet!)

Pro-forma EPS = 1.2p so at 42p thats a historic PE=35
Projected EPS = 4.4p so at 42p thats a forward PE=9.5

If anything like that growth was achieved then they should be on a PE=20, say so put another way thats a share price of 88p

So a potential 100% uplift in 12 months.

If they achieved somewhat lower growth lets say the 3m annualised PBT they already appear on target for: 3/3.6*4.4=3.7p EPS put that on a lower PE=15 say 55p share price a 30% uplift.

So, there appears to be a reasonable margin for error in the research notes (if you assume that they have their cost models correct!) and still to have a good projected return.

Conclusions

Id like to see more of a track record that the company can handle this explosive growth. But the prospects do indeed appear to be very healthy.

The growth looks good, and there appears to be enough of a margin in the predictions to still give a good return if those predictions are missed by a little.
_________________
Always Do Your Own Research ... it's your decision to invest or not!
null

Agreement with DaimlerChrysler Retail Ltd

http://www.uk-wire.com/cgi-bin/articles/200407260700071921B.html

Another big step forward for ACE with more to come this year by the sound of it.

Dave

In today's FT:

Car group's successful run is no accident

By Malini Guha, Michael Neill and Philip Stafford

Published: August 3 2004 |

Shares in Accident Exchange, the replacement car group, have gained 15 per cent in the last week, after a positive reception to analysts meetings. The shares, flat yesterday at 61p, have run up 44 per cent in the last three weeks.

The rally has been helped by an agreement with DaimlerChrysler Retail for the
provision of accident management and business support services, such as IT-based
vehicle tracking, for Daimler's Mercedes Benz retail dealership operations within their Birmingham and Manchester areas.

Investors saw the deal as backing for its business model. It specialises in replacing prestige vehicles by providing car hire on credit to motorists involved in non-fault accidents.

The company has also been aided by problems at rival Bristol and London, where its previous adviser Rowan Dartington resigned, saying it had lost confidence in the current executive management. Bristol and London are in talks with alternative advisers.

In its second profit warning in four months in May, Bristol admitted new market entrants, like Accident Exchange, were having an impact. The news has left fund managers and analysts bullish about 2005 earnings. Accident said at the end of June that trading in the first two months of its new financial year had been significantly ahead of expectations.

Research group Hardman forecasts full-year sales will jump to 11.8m from 4.1m while adjusted pretax profit will rise to 3.8m from 1.1m.

Any reason for the latest 10% increase..?

shareshark
can you put a chart (3 year) in the header please
d.

keeping an eye on this today, I got in at 121, thought it could be the peak, but oh no. 70% up since last news, whats happening!?

Tipped in Shares mag page 6 today....hence the interest.

Ahh i see, its a very attractive chart if nothing else!

Cheap as chips , fill yer boots Dai :-)

So are they saying this is still cheap?

Yes I believe that is what they are saying.

Thats nice to know!

Dai , next stop 240p

ramp ramp ramp DYOR ask Sue Helen

:-)

Took profits this week, thanks for the nod Dil.
Dai :-)

Just bought some of these today, couldn't believe drop following that stellar trading update.

capa

Results next week, a little bit of buying today.

capa

Recommended a buy and added to their core growth portfolio in Investor for Growth newsletter out yesterday

If the Zulu man Jim Slaters team is buying then that will do for me.

capa

Seems to be quite a number following Slaters lead today on the run up to results.

capa

Breakout ! Above 2.00 this is going a lot higher imo

capa