AA PLC Pre-close trading update (2490X)
August 09 2018 - 2:00AM
UK Regulatory
TIDMAA.
RNS Number : 2490X
AA PLC
09 August 2018
9 August 2018
AA plc
Pre-close trading update
On-track to meet FY19 guidance
AA plc, today publishes a trading update for the six-month
period ended 31 July 2018. Despite the extreme weather conditions
we remain on-track to deliver our previously announced guidance of
Trading EBITDA of between GBP335m to GBP345m for FY19.
Roadside
As announced with our strategy update in February 2018, in order
to return our Roadside business to growth, we are undertaking a
phased programme of investment over the next three years that will
deliver a differentiated member and product proposition to drive
new membership growth and retention levels higher.
In line with our expectations, the paid membership base declined
by 1% in the six-month period to 3.25m impacted by a decrease in
the retention rate to 81%. The retention rate over the last 12
months has been impacted by regulatory pressures (including renewal
price transparency) and increased competitor activity. New business
remains robust, with sales broadly flat year on year. Looking
ahead, the completion of the new membership IT system (CATHIE) and
ongoing improvements to the 'Stay AA' customer retention
proposition are expected to lead to improved retention rates and a
growing paid membership base over the medium term.
Total breakdowns during the period were 1.91m, an increase of 8%
compared to the same period last year. This was significantly
higher than both our expectations and the average over the last 10
years due to the extreme weather conditions. This resulted in
increased costs of third-party garaging to supplement our own
patrol availability which was partially offset by the additional
revenue generated from our pay-for-use B2B contracts.
We continue to make good progress with the recruitment of new
roadside patrols who will be allocated to high service areas. In
addition, we are also developing strategies to enable us to
monetise more referrals to third party garages and better manage
our workload through the AA breakdown app. In the longer term,
increased utilisation of the breakdown service drives brand
awareness and retention.
The AA continues to build on its leadership position in digital
mobile platforms, including the AA breakdown app. More than 1
million members are now registered for the app and it continues to
be used in about one-third of breakdowns that we service for our
members. We are also making good progress with the development of
our connected car strategy. During the second half of this year, we
will add new functionality including integrating elements of our
Car Genie app into the AA breakdown app thereby allowing our
members to benefit fully from an integrated journey from the point
of breakdown that we believe will drive higher levels of member
engagement.
Insurance
Our Insurance business, comprising the broker, in-house
underwriter and our financial services business, continues to
perform well.
Since 31 July 2017, we have achieved 7% growth in motor policies
to c659,000, in line with our expectations. In addition, we are
pleased to report that we are making good progress with stabilising
the decline in the home policy book. Since the year end the home
policy book has been broadly flat, well ahead of our expectations.
Supported by our in-house underwriter and our investment in systems
including Insurer Hosted Pricing, we expect further growth in our
motor policy book and to return the home policy book to growth in
FY20.
Our in-house underwriter continues to grow rapidly and now has
c463,000 policies, approximately half of which are motor policies.
As announced with the strategy update, we commenced underwriting a
new motor insurance scheme in the period with Munich Re to
specifically target non-members. Alongside increased penetration
within the existing membership base we remain on-track to deliver
strong growth for both the underwriter and broker.
Cash generation
Our business continues to experience strong and predictable
levels of cash conversion. As a result of the recent refinancing,
we have successfully managed to extend our effective near term
maturities until January 2022. The average maturity of our debt is
now just below five years and gives us the runway to execute our
plans and deliver growth in our Roadside and Insurance
businesses.
We expect total capex spend for FY19 to be GBP105m (excluding
capex accruals), in line with our guidance.
Our interim results for the six months ended 31 July 2018 will
be published on 26 September 2018.
Enquiries
IR
Zeeshan Maqbool, Head of
Investor Relations +44 20 7395 7303
Media: Finsbury
Jenny Davey
Philip Walters +44 20 7251 3801
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END
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