Aa Share Discussion Threads

[blueball] 03/3/2018 12:58

Stay short.

[srpactive] 02/3/2018 12:56

Seems to be in a range of 74p - 81p at the
moment with some institutions buying, some
not, dyor.

[jonwig] 02/3/2018 08:48

@ diku - the new expensive cars are mostly bought on PCP and returned to the seller after maybe three years, as part-exchange for another new one. Even up here in West Yorkshire it's the preferred way to buy. (Maybe also the next big mis-selling scandal!)

I don't think that's either positive or negative for AA, as these cars will eventually become old ones, but you've often got at least three year warranty. Mine had its first fault after three years and two months, which raised a bit of suspicion!

[srpactive] 02/3/2018 08:38

diku

Yes wealth all down south unfortunately, but the
more technology on the vehicles, the more to go
wrong, I do think the AA. have something to offer
hence I have been buying in here from 73p, dyor.

Getting close to 79.5p, dyor.

[diku] 01/3/2018 23:07

People drive more newer cars today than say 10 - 15 yrs ago...maybe it is a status thingy or makes them feel good...just look at the amount of Audis, BMWs & Mercs on the road...at least in London...

[srpactive] 01/3/2018 15:27

Yes looking better, if we could just close above 79.5p, fingers crossed, dyor.

[pally12] 01/3/2018 15:19

and Deutsche Bank

[srpactive] 01/3/2018 12:01

Another holdings rns, has Merril Lynch increased?

[pi0110] 01/3/2018 11:52

Minerve

Fair enough but I can remeber 21st century technology (C21) rolling out their new onboard driver analysis technology which was going to be a big seller for the company. It simply didn't take off and now the company sits around £2.5m mkt. cap.

People dont want to pay for this technology unless it comes fitted as new due to many reasons such as cost, proven technology and fear of their shiny cars having cables and holes fitted etc. Not suggesting that this is the case but the apprehension will be there anyway.

Re ageing cars and potholes etc. this has always been the case since cars and roads were introduced. See here for average age of cars in the UK from 2000 to 2016.



It has followed a narrow range between the low of 6.7 to a high of 7.8 years over this period.

[minerve] 01/3/2018 11:04

pi0110

"What you have described is old technology, that stuffs been around for years. I fyou think the AAs future depends on this then that is a real worry."

None of the AA growth projected in the current plan incorporated anything that might come from connected car. Even they (AA) are not assuming anything in this area yet. They are seeding the market and harvesting the results to see what can be exploited and how. Very prudent.

The CEO is ex Microsoft/Expedia and Uber. He is not blind to tech and big premium tech.

One of my reasons for investing is Simon Breakwell.

[minerve] 01/3/2018 10:59

You are assuming all cars on the road are new. Many are old, and if UK finances get worse the average age will increase. Electric cars are only going to sell when people can actually afford to buy them and run them. Motorway and traffic congestion is only going to get worse leading to overheating problems. Roads are only going to get worse with pot holes because of councils lack of money to repair them. Products are going to get less reliable because of increased competition and need to cut costs. Stress and work pressures will increase leading to cars being run on lower budgets and owner forgetfulness - running out of fuel or using the wrong fuel etc.. They will still call rescue services when they break down regardless of membership and it will cost them more for the privilege.

[blueball] 01/3/2018 10:55

Heading to 50p sooner than I'd expected.

[ltcm1] 01/3/2018 10:48

Modern cars hardly ever breakdown anyway.

What is to stop another provider offering the dashcam. Or Google. It's not like they invented the tech.

The AA is just another Yell and will be toast in just a few years.

[pi0110] 01/3/2018 08:54

Blondeamon

What you have described is old technology, that stuffs been around for years. I fyou think the AAs future depends on this then that is a real worry.

[blondeamon] 01/3/2018 08:36

Technology will transform AA in a way that people will not realize this is a road club anymore. The model of the future is not to change tyres and light bulbs but to have automated diagnostics tools and on-the-fly support mechanisms to minimize disruption.

Companies will pay a lot of money to avoid a breakdown compared to how much they want to spend for handling a breakdown. One is preserving a company's operations, reputation and ensures stability and the other is only a bad experience.

Take it a step further and add dashcams into the mix. You have the Car Genie with a dashcam, you are involved in an accident and not only you get immediate emergency services rushing your way while you might be unconcious but you also have recorded all the series of events including a video/audio footage of it.

What the AA steps into is a holistic experience for the driver, planning to cover all their needs. That includes a telematics insurance soon. All in one place under one provider with a unifying support model.

Other road clubs in Australia and Europe are already doing similar things, it's a brilliant plan but it will take time and cost money.

[ltcm1] 28/2/2018 13:29

Thanks Minerve. "Covenant light structure" LOL.

I don't know how likely a halving of FCF is but it isn't like they are a unique service or have no competition.

All I am saying is you would need to be very sure about this covenant.

[srpactive] 28/2/2018 13:10

Minerev

You are most welcome, I am new to aa. but also
hope to be around for years to come, I attempt
to buy recovery situations, that pay a dividend
and in time once back on their feet the dividend
becomes very handsome indeed, as with a few of
my others.

Regarding the aa. as a service, we had to use them last year
and they were actually very good indeed.
One point someone has mentioned here is accessing the younger
driver as they do like industry to come to them due to
their internet upbringing, due to this I would look to introduce a
call to you tyre replacement service, dyor.

[minerve] 28/2/2018 12:53

itcm1

"Minerve what would trigger control to pass to the bondholders and the Special Purpose Vehicle???

I take it there are a set of defined conditions???"

It most likely will be a breach of covenant on the debt. This is taken from their recent presentation:

SIGNIFICANT PROTECTION AFFORDED TO EQUITY HOLDERS
• Covenant-light structure, with only one maintenance Debt Service Coverage Ratio (DSCR) covenant associated with the Class A Notes
• This covenant, which effectively is an interest coverage ratio, is set at 1.35x: with c.£100m of annual interest cost for the Class A Notes (fixed in nature), Class A Free Cash Flow would need to more than halve before any breach could potentially occur
(1)
•As such, the risk of default remains very low
(2)




Page 48

[minerve] 28/2/2018 12:47

srpactive

Thank you for your kind comments. I think there are several of us who can contribute meaningfully to this thread. I am a long-term investor, so I will be around, hopefully, for many years, or until it is obvious the growth/debt reduction plan isn't going to work. That could be 3-4 years plus.

[ltcm1] 28/2/2018 12:15

Minerve what would trigger control to pass to the bondholders and the Special Purpose Vehicle???

I take it there are a set of defined conditions???

Were it to happen I take it would be an equity wipeout???

[srpactive] 28/2/2018 09:40

i

This from the market update rns.

=========================

AA PLC Pre-close trading update
08/02/2018 7:00am
UK Regulatory (RNS & others)

Cash generation

The business has continued to generate healthy levels of cash. As a result of the refinancing in July 2017, we further reduced the cost of borrowings and extended the average maturity of our debt. We have no near-term refinancing requirements.

[srpactive] 28/2/2018 09:16

Minerve

Very good and informative post, please keep posting a thread needs
a very clever contributor and you know the debt position well, thank you.

================================

From strategy update.

-- We remain confident that our financial requirements are well funded

The strength of our debt structure

We remain well funded to meet all of our operational and debt financing requirements. The combination of our WBS debt structure, our successive refinancings and our strong cash generative business model give us the following attributes:

-- The average cost of debt, at 4.52%, is significantly lower now than it was at IPO
-- The average maturity of our debt is just over 5 years

-- We have significant headroom above our financial covenants which are not linked to leverage. Trading

EBITDA would have to fall to c.GBP200m for us to be close to breaching our default covenants

-- The WBS is flexible from an operational perspective and its credit enhancing characteristics enable refinancing at attractive rates

-- Long-dated bonds paying fixed interest rates and pricing reflecting the investment grade of the A notes

-- We pay a lower debt service charge than we would with a traditional bank facility as a result of the lack of amortisation on debt payments