FY20 RESULTS 7 May 2020
DISCLAIMER This presentation contains “forward -looking statements” which are prospective in nature and are not based on historical facts, but rather on current expectations and projections about future events. Such statements are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as “plans”, “expects” or “does not expect”, “is expected”, “is subject to”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements, including business, economic and regulatory changes as well as the risks set out in the Company’s annual report and accounts, which can be found on its website (www.theaaplc.com/investors). Such forward-looking statements should therefore be construed in the light of such factors. Neither the Company, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the events expressed or implied in any forward- looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation, the Listing Rules and the Disclosure Guidance and Transparency Rules), the Company is not under any obligation to update, revise or correct any forward- looking statements, whether as a result of new information, future events or otherwise. No statement in this presentation should be construed as a profit forecast or relied upon as a guide to future performance. 1
DEFINITIONS The following definitions apply throughout Trading EBITDA (earnings before net finance costs, tax, depreciation and amortisation): excludes share-based payments, pension service charge adjustment, contingent consideration remeasurement movements and adjusting operating items. Cash conversion: net cash flow from continuing operating activities before tax, capital expenditure and adjusting operating items divided by Trading EBITDA. Adjusted EPS: Earnings per share adjusted for a number of one-offs of which the largest are adjusting operating items, share-based payments, pension service charge adjustment, contingent consideration remeasurement movements, the write-off of debt issue fees, penalties on early repayment of debt, net gains on the settlement of debt and transfer from cash flow hedge reserve. Personal members and business customers: measured as the number at the year end. 2
TODAY’S PRESENTERS Simon Breakwell Kevin Dangerfield Chief Executive Officer, AA plc Chief Financial Officer, AA plc Joined the AA’s Board as Non -Executive Director in Kevin joined the company on 6 January 2020 September 2014, and appointed Acting Chief Executive in A qualified chartered accountant with more than 25 years’ August 2017. Subsequently appointed as permanent Chief experience in the technology and manufacturing industries Executive Officer on 25 September 2017 Kevin has held various CFO roles in other public listed Previously a Partner at TCV, a leading global mid cap fund and companies, including Laird plc and Morgan Advanced a Non-Executive Director of HomeAway Inc. Materials plc Previously responsible for establishing the European operations for Uber Simon was also a founder of Expedia and had responsibility for the company’s North American operations 3
Opening remarks and COVID-19 update Simon Breakwell Financial review AGENDA Kevin Dangerfield Strategy update and Business review Simon Breakwell 4
A UNIQUE INVESTMENT PROPOSITION AA top of Which? 2019 Feefo Gold Trusted Service for breakdown cover and Award 2019 and 2018 awarded Recommended for delivering exceptional Provider status experiences High recurring Excellent revenue and EBITDA standards of service delivery growth with strong cash generation AA top of What Defaqto Partner of choice Car? 2019 and 2018 5 star rating 2019 Leading market for B2B customers for best breakdown for our position cover provider comprehensive car insurance Trusted Mature, attractive market with significant Brand barriers to entry 5
UNLOCKING OUR POTENTIAL 6
KEY PROOF POINTS FOR FY20 FY20 FY20 Objectives expectation performance Membership Membership Turnaround Roadside membership growing broadly flat +0.2% y-o-y Continued strong +10% total Continue Insurance acceleration policy growth policy growth Consensus 1 Deliver Trading EBITDA growth £350m £349m Guidance Strong free cash flow generation £83m c.£80m 1 Based on published estimates from seven analysts as at 30 March 2020. 7
FY20 HIGHLIGHTS Strong financial and operational performance Roadside membership now returned to growth Insurance delivering strong rates of profitable policy growth Roll-out of new differentiated products and services underway – Smart Breakdown, Smart Care Continuing to build industry leading strategic partnerships. Bank of Ireland partnership extended by an additional three years to at least 2028 Ongoing proactive debt management; FY20 final dividend suspended Putting service, innovation and data at the heart of the AA 8
COVID-19 – ORGANISATIONAL RESPONSE – MAINTAIN SERVICE FOR CUSTOMERS Number one priority is to protect the health and wellbeing of our staff, customers and suppliers Initiated a number of actions across the business to maximise business continuity • Implemented our Gold/Silver/Bronze emergency management/meeting protocols to drive daily command and control decision making • Whole organisation was homeworking in less than 3 weeks, except very small number of staff in Oldbury • Established appropriate safe working protocols for all staff and secured all required PPE • Daily communication from CEO to organisation, recently moving to three times a week • Participating in the Government’s furloughing scheme 9
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COVID-19 – DECISIVE ACTION TO DEMONSTRATE RESILIENCE Measures in place to flex costs and preserve cash including deferral and reduction of a range of operating costs • Dividend suspended • Pay and hiring freezes • Suspension of normal bonus scheme • Board have agreed to take a 15% reduction to their base salary for 3 months • Further tightening of cost controls across the business We remain comfortably within our financial covenants and supported by predictable cash flow and liquidity Given the resilient business model combined with the benefits of the actions we have taken and are taking , we expect current year performance to be robust and only slightly below FY20 11
COVID-19 – CURRENT BUSINESS STATUS CHECK Insurance Roadside Good service on the road and in call centres Good service in call centres New Business marginally down Breakdowns volume dropped, but picked up recently – low garaging, PFU and ancillary offset Renewal retention rates holding up well drop in workload Reduced claims offsets lower Accident Expect B2C membership to be down H1 and then Management income some recovery Demonstrated good resilience Driving School has seen reduced trading Softness in Financial Services Current Priorities Ongoing mitigation of commercial impacts Planning for phased restrictions ease Broad-based marketing initiatives for post lockdown, capturing COVID operational learnings Re-prioritising efficiency and cost to serve improvement initiatives 12
FINANCIAL REVIEW
FY20 FINANCIAL HEADLINES Revenue up 2% at £995m (FY19: £979m) Trading EBITDA up 3% at £350m (FY19: £341m) and Trading EBITDA margin stable at 35% (FY19: 35%) Operating profit up 17% at £257m (FY19: £219m) PBT up 102% to £107m (FY19: £53m) Free cash flow generation of £83m (FY19: £12m) Net debt post IFRS 16 of £2,645m (FY19: £2,715m) • £32m bond buy-backs completed for £28m cash consideration February 2020 refinancing increases average expected maturity of debt from 3.3 years to 3.9 years • £325m exchange offer of A5 notes significantly oversubscribed Early drawdown of STF fully de-risks July 2020 refinancing of £200m A3 Notes • S&P rating confirmed for A notes (BBB-) 14
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