The agreed purchase figure is effectively twice 1AM and RCRL's profits in the next two years up to a capped limit of £10 million. The opportunity to acquire 1AM was taken following a decision by the Court of Appeal in April. It ruled that 1AM's credit hire agreements fell within the strict regulatory controls of the Consumer Credit Act 1974, but did not comply with them. Accordingly a substantial amount of its debtor book may not be recoverable from insurance companies. An application for leave to appeal is currently pending.
This has resulted in 1AM and RCRL making exceptional bad debt provisions of £2,485,676 and £308,262 respectively in their statutory accounts to June 1999. In the 13 months ended June 30, 1999 and after accounting for the bad debt provisions, 1AM had net assets of £337,493 and made a loss before taxation of £1.5 million. In the 13 months ended June 30, RCRL had net assets of £130,049 and made a loss before taxation of £98,617. Turnover for the same period was £5.5 million for 1AM and £772,632 for RCRL.