Shares digital

First there was a profit warning, this was followed by a legal dispute over old claims and then funding became the problem at Accident Exchange (ACE). All these issues behind it, it seemed management had only to concentrate on improving cash flow. But just as the working capital situation improves it looks like the backcloth for businesses like Accident is deteriorating, as it acts as the middleman in the courtesy car world.

If you have an accident, your dealership contacts Accident Exchange for a replacement car and then passes the bill on to the insurance company. But even Accident’s house broker Numis warns that the insurance companies are becoming more awkward in order to restrict claim costs.

Management has been playing hard ball, threatening legal action against insurance companies who don’t pay within the 90 days under its terms. This has improved cash flow, with average daily cash receipts of £588,000 to date in Q4 versus £476,000 in Q3, but the risk is, longer term, that the insurance companies will find a way of bypassing the company altogether to cut their costs.

Shares says: When the house broker says its buy recommendation is under review, alarm bells ring.

by: Simon Keane