Aa (LSE:AA.)
Historical Stock Chart

From Apr 2019 to Apr 2024

TIDMAA.

RNS Number : 1267I

AA PLC

31 March 2020

31 March 2020

AA plc

Trading update

Further to the announcement made by AA plc (the AA or Group) on 23 March 2020 on the delay of the publication of the Group's preliminary results for the year ended 31 January 2020 (FY20) at the request of the Financial Conduct Authority, the Group today publishes a summary of unaudited financial information in respect of FY20 and an update on current trading.

Covid-19 update

The outbreak of Covid-19 has been unprecedented in its impact on society and the global economy, and our priority is to protect the health and wellbeing of our staff, customers and suppliers.

The AA provides an essential service and we have initiated a number of actions across our Roadside and Insurance businesses to ensure the continuity of our operations and services. We have put in place appropriate safety protocols across the Group including the implementation of an extensive programme of home working which has enabled the temporary closure of all of our offices with the exception of Oldbury, our emergency contact centre.

To date, the spread of Covid-19 has not impacted the Group materially but there continue to be risks, including disruptions to our operations and, consistent with the rest of the market, there can be no certainty as to the future impact. We are planning and executing changes to our operations that include the deferral or reduction of operating costs and capital expenditure across the Group to ensure we limit as much as possible the impact to our Trading EBITDA and cash flow forecasts.

The AA has proved resilient through previous economic downturns and the steps we are now taking will help us maintain that resilience. The management team has successfully turned the operational and commercial performance of the AA around in the last two years and remains focused on navigating the challenges ahead.

Proactive balance sheet management

The Group remains committed to the proactive management of its capital structure and reduction of debt and will continue to assess all options. Consistent with this approach, and also in light of the Covid-19 outbreak, the Board has made a decision to suspend the final dividend in respect of FY20. Total dividend payments in FY20 will therefore remain 0.6p per share, representing the amount paid in respect of the interim dividend.

As at 31 January 2020, the Group had cash and cash equivalents of GBP149m(6) and an available Working Capital Facility of GBP50m. We remained well within our financial covenants at year end.

Summary of unaudited financial results

Today we are releasing the following key unaudited financial information for the year ending 31 January 2020 (FY20) and do not expect material deviation once the audit is complete.

 
 
                                Year ended 
                                    Jan 20         Year ended 
                                    (FY20)             Jan 19 
                               (unaudited)             (FY19)         Change 
--------------------------  --------------  ---  ------------  ---  -------- 
 GAAP measures 
 Revenue (GBPm)                        995                979            +2% 
 Operating profit (GBPm)               257                219           +17% 
 Profit before tax (PBT) 
  (GBPm)                               107                 53          +102% 
 Basic EPS (pence)                    14.1                6.9          +104% 
 
   Non-GAAP measures 
 Trading EBITDA(1,5) 
  (GBPm)                               350                341            +3% 
 Trading EBITDA(2) margin 
  (%)                                   35                 35           Flat 
 Free cash flow(4) (GBPm)               83                 12          +592% 
 Adjusted profit before 
  tax(3) (GBPm)                        107                115            -7% 
 Adjusted basic EPS(3) 
  (pence)                             14.1               14.9            -5% 
--------------------------  --------------  ---  ------------  ---  -------- 
 

Operational highlights

   --      Roadside 

o Membership base returned to growth during the second half and rose 0.2% on the year to 3.215m (FY19: 3.207m); Retention of 80% (FY19: 80%) reflects strength of service proposition and pricing

o All key B2B contracts retained or extended. New strategic partnerships with Admiral and Uber delivering incremental new revenue streams

o Average income per member up 2% to GBP165 (FY19: GBP162) and average income per B2B customer up 5% to GBP22 (FY19: GBP21)

   --      Insurance 

o 19% growth in motor policies to 869,000 (FY19: 731,000) and 2% growth in home policies to 844,000 (FY19: 830,000), benefiting from investment in marketing, incremental sales and renewals through our in-house underwriter as well as systems investments including Insurer Hosted Pricing

o Strong conversion rates of 36% (FY19: 25%) into our Roadside business

o Average income per motor and home policy including income from underwriter and Accident Management business up 4% to GBP83 (FY19: GBP80)

Financial highlights

-- Trading EBITDA up 3% to c.GBP350m (FY19: GBP341m), in line with market expectations; PBT more than doubled to c.GBP107m (FY19: GBP53m)

   --     Capex of c.GBP69m (FY19: GBP82m) in line with guidance 

-- Free cash flow (pre-dividends, refinancing costs and bond buy-back) up significantly to c.GBP83m (FY19: GBP12m), in line with guidance

-- Completion of the triennial review of UK defined benefit pension scheme to 31 March 2019 results in a significant reduction to the technical provisions deficit of 64% to GBP131m (31 March 2016: GBP366m). Annual cash saving expected to be c.GBP6m per annum year on year

-- Completion of a consultation process to close the CARE section of the UK defined benefit pension scheme to future accruals reduces the pension cash costs by c.GBP4m per annum. The consultation has resulted in an enhancement to the defined contribution scheme being agreed for affected employees which will cost c.GBP11m over three years starting from 1 April 2020

   --     Continued proactive debt management underpinned by improving operational performance 

o GBP32m of bond buybacks completed, A notes GBP3m and B notes GBP29m

o Average debt maturities extended from 3.3 years to 3.9 years following refinancing in February 2020 of GBP325m of A5 notes with new A8 notes at 5.5% interest rate

Further information on a revised timetable for publication of our preliminary financial statements will follow when further guidance from the FCA and other regulatory authorities is available.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Ends.

 
 Enquiries 
 Investors                 +44 20 7395 7301 
  Zeeshan Maqbool          zeeshan.maqbool@theaa.com 
 Media (FTI Consulting) 
  Alex Le May 
  John Waples 
  Nick Hasell              +44 20 3727 1340 
 
 

Notes

1. Earnings before net finance costs, tax, depreciation, amortisation, adjusting operating items, share-based payments, contingent consideration remeasurement gain and pension service charge adjustments.

   2.    Trading EBITDA divided by Revenue arising within operating segments. 

3. 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 gain, the write off of debt issue fees, penalties on early repayment of debt and transfer from cash flow hedge reserve.

4. Net increase in cash and cash equivalents pre-dividends, re-financing costs and bond buy-back.

5. Trading EBITDA as at 31 January 2020 includes a GBP3m benefit from the adoption of IFRS 16 during the year. The comparative figure for last year does not have any IFRS 16 impact included.

6. Included within cash and cash equivalents is restricted cash of GBP69m which is restricted for contractual or regulatory purposes.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

TSTJMMRTMTAJBMM

(END) Dow Jones Newswires

March 31, 2020 02:00 ET (06:00 GMT)