INVESTOR PRESENTATION Including FY 17 Results
FUNDAMENTALS
PROVIDING SERVICES TO AA MEMBERS SINCE 1905 Brought under common Founded by Patrols on 35% share Launched Patrols issued ownership with DriveTech and motoring bicycles and of 2m cars on the Roadwatch and with diagnostics Saga in the Auto Windshields IPO enthusiasts uniforms road Relay equipment Acromas Group acquired 26 June 1905 1907 1909 1912 1939 1949 1973 1992 1999 2003 2004 2007 2009 2010 2014 1st AA insurance Launched New fleet Launched AA members Acquired by BSM acquired, policy AA Routes and to enable four AA Driving voted to private equity launch Home AA Stars wheel patrols School demutualize the groups CVC and Services AA and join Permira Fund Centrica Group 2
THE LEADERSHIP TEAM Bob Mackenzie Martin Clarke Executive Chairman Chief Financial Officer Previously Chairman and CEO of National Car Parks Previously Partner and Global Head of Consumer for and its subsidiary Green Flag Permira Prior to that CEO of Sea Containers Prior roles at Cinven, Silverfleet and and Chairman of PHS Group board member of New Look and Gala Coral Janet Connor Mike Lloyd Restructuring and Insurance Director Commercial Director Previously Managing Director at More Than; MD at Previously Partner at Oliver Wyman focused on Ageas-owned over-50s broker RIAS from 2006 to 2011 Consumer Service businesses in FS, Energy, Home, TV and Telecoms Accountable for Insurance Underwriter and Membership policies and governance Responsible for Roadside Assistance and Insurance Services, marketing and digital functions Oliver Kunc Kirsty Ross Operations Director Membership Services Director Previously Managing Director of Central Heating Previously Strategy and Innovations Director; Installations at British Gas; prior roles at Barclays, BA Principal at Oliver Wyman and LEK consulting Responsible for Motoring Services, Media and Driving Responsible for operations including patrols, School businesses, connected car strategy and deployment, call centres and technical development Group strategy 3
ROADSIDE ASSISTANCE AT THE CORE Roadside Assistance Insurance Services Driving Services Trading Revenue 4% Consumer Broking Driving Schools 14% 3.3m paid personal Members Leading insurance broker Largest driving school in the UK (by pupils) Average income per Members Predominantly motor and 79% £158 home AA and BSM brands 82% retention 1.9m policies 10% of pupils in highly Roadside Assistance fragmented market Average income per policy Insurance Services B2B £70 2,607 instructors franchised Driving Services 10.0m business customers Home Services DriveTech Trading EBITDA Largely pay-for-use Developing home emergency Provides driver awareness Average income per B2B 4% position training, fleet management customer £20 17% and driver training Financial Services AA-branded partnership with Bank of Ireland 79% 100k products in first full year 4
RESILIENT AND CASH GENERATIVE BUSINESS MODEL £m Trading EBITDA Revenue 979 984 971 974 973 943 940 931 893 808 794 755 430 423 415 403 395 369 371 366 334 292 273 219 Year to Year to 13 months FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Dec 2005 Dec 2006 to Jan 2008 £m Operating cash flow Cash Conversion 102% 100% 101% 94% 92% 433 431 420 371 371 FY13 FY14 FY15 FY16 FY17 Note: 2005, 2006, 2008 and 2009 unaudited; FY 17 excludes Ireland business disposed of in August 2016. 5
MARKET LEADERSHIP AND HIGH BARRIERS TO ENTRY Widely recognised and trusted brand Consumer market share Others 50% of households hold an AA product 19% Unique deployment IP 40% GF 14% 3,000 patrols; average tenure 12 years attending 10,000 breakdowns per day RAC 27% 82% of breakdowns repaired at roadside B2B market share 3.6m 2.4m B2B 67% 0.7m 63% Consumer 50% Motor Fleets and Leasing AVA manufacturers Source: Industry sources; Note: The number of breakdowns for GreenFlag is last year’s number 6
A TRUSTED BRAND BASED ON EXCELLENT SERVICE LEVELS Which? total test score Call handling 80% in 20 seconds Major providers Repair rate 82% 74% App usage >22% Average call time <5 minutes Call to arrive time 45 minutes 66% 64% AA “moment of truth” survey (%) 22% 26% 31% 66% 57% 53% September 2016 Overall experience Service provided Overall experience Which? Recommended Provider with the AA by Patrol over the phone for consumer and Manufacturer for 11 th successive year Excellent Very Good 7
LONG TERM STRATEGIC PARTNERS Contract wins in the last two years: Lex Autolease, Porsche, Volkswagen Group Recent renewals or extended contracts: Alphabet, Barclaycard Buying Group, BT,G4S,Hertz, Isuzu, Lexus, Lotus, MG, Northgate, Subaru, South West Ambulance Trust, Toyota, Venson, Vauxhall
STRONG BRAND IN INSURANCE Insurance Services Core insurance revenue breakdown Brand consideration for switching Motor Insurance Other 40% 9% Direct Line 35% Unprompted awareness (%) Aviva 30% Motor Admiral Home 52% 39% 25% Churchill 20% Tesco LV = AA 15% Axa No 1 motor insurance broker in the UK private Hastings Direct 10% Swinton car insurance market Saga Esure 5% MoreTh>n No 2 private home insurance broker in the UK 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% Consideration (%) Source: GfK FRS Study September 2016 9
RELATIVE RESILIENCE OF MEMBERSHIP BUT CHALLENGES IN RECENT YEARS Under-investment in AA Members (m) AA Membership vs GDP Growth UK GDP growth (%) systems, brand and capabilities 5.0 20% Legacy of short-term decision making 4.0 15% Membership run-up and reduction following Premium position not demutalisation 3.0 10% underpinned by marketing, US savings and advertising, proposition loan crisis Financial Oil Crisis 2.0 crisis 5% IT platform dated and constraining growth 1.0 0% (except Deployment system) 0.0 -5% 1975 1980 1985 1990 1995 2000 2005 2010 2015 10
STRATEGY TO TRANSFORM THE AA Grow our core Roadside Assistance business Reverse long standing decline Strengthen the AA to become the pre- Refresh advertising and marketing eminent membership services organisation in the UK Evolve new channels for Membership growth Strengthen our B2B positioning Expand our technology capability Revolutionise the customer experience through investing in the Strengthen IT systems and processes brand and embracing new Realise the potential of digitalisation technologies Develop our connected car positing Build on our brand Reduce Group borrowings and the associated interest costs Widen reach of AA Insurance through Underwriter Grow AA financial services position 11
THE UK’S PRE -EMINENT MEMBERSHIP SERVICES ORGANISATION Resilient, Market leader high return with a business model trust brand Clear strategy to Platform for revenue transform the AA for a growth and accelerated digital age cash generation 12
FY 17 RESULTS 28 March 2017
DEFINITIONS The following definitions apply throughout • Trading Revenue: Revenue excluding discontinued operations, business disposed of and exceptional revenue items • Trading EBITDA (earnings before interest, tax, depreciation and amortisation): excludes exceptional items, items not allocated to a segment and the Ireland discontinued business • Cash conversion: net cash flow from continuing operating activities before tax and exceptional items divided by Trading EBITDA • Continuing adjusted basic EPS: Earnings per share excluding discontinued operations adjusts for a number of one-offs of which the largest are exceptional items, items not allocated to a segment, and exceptional finance costs • Personal Members and Business Customers: measured as the number at the period end • IPT: Insurance Premium Tax 14
Headlines Bob Mackenzie AGENDA Financials Martin Clarke Strategy Bob Mackenzie 15
HEADLINES
GOOD PROGRESS TO DATE IN YEAR 2 OF THE TRANSFORMATION Transformation gaining momentum Results in Strong Growth in paid personal Members line with cash App used in 22% of personal breakdowns expectations generation Call outs up 5% but costs partially offset Productivity improved Cost of Total dividends First motor insurance policy growth since 2008 borrowings of 9.3p Cost savings on target reduced recommended Normalised capex levels in sight A platform for sustainable growth The UK’s pre -eminent Membership services organisation 17
FINANCIALS
FINANCIAL HEADLINES Trading Revenue up 1.6% at £940m despite IPT increase • Roadside up 2.5% to £742m Trading EBITDA up 0.2% at £403m • Roadside up 1.1% to £365m Trading EBITDA margin 42.9% (FY 16: 43.5%) Adjusted EPS 21.3p (FY 16: 21.8p) Cash conversion 92% (FY 16: 101%) Net debt of £2,704m (6.7x Trading EBITDA) post refinancing in December Total dividends of 9.3p per share recommended In line with market expectations 19
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