AA PLC FY17 Pre-close announcement (2795W)
February 08 2017 - 1:00AM
UK Regulatory
TIDMAA.
RNS Number : 2795W
AA PLC
08 February 2017
8 February 2017
AA plc
Trading in line with expectations
Transformation on track - Membership growth reverses
long-standing decline
The AA will announce results for the financial year ending 31
January 2017 on 28 March.
Trading for the year is in line with market expectations and an
important milestone has been achieved with growth in Membership
numbers. The number of paid personal Memberships at 31 January 2017
was 3,335,000, a rise of 0.4% since 31 July 2016. This was driven
by a 19% growth in new business volumes in the second half compared
with the corresponding period in the prior year and an improved
annual retention rate of 82%.
The IT transformation programme continues to make good progress.
We are especially pleased that sales through our digital channel
have grown significantly and that our new CRM (Customer
Relationship Management) system allows us to undertake better
targeted marketing campaigns. Our AA breakdown app has now been
downloaded by more than one million personal Members and is being
actively used in 22% of breakdowns. In the year ahead we expect to
begin processing both new business and Membership renewals through
our new IT systems which will improve the Membership experience and
deliver further cost benefits. This and other efficiencies within
our core business underpins our confidence that we can meet our
cost saving targets for the 2019 financial year.
The number of breakdown incidents in the year grew by 5%,
reversing the trend of gradual decline. Whilst unhelpful for costs
in the short term, it nonetheless underscores the continued demand
for our services and enhances a customer's likelihood of renewing
their Membership.
The insurance business has also started to show progress. In its
first year of business the AA's in-house underwriter has performed
ahead of expectations underwriting 115,000 motor insurance
policies. The majority of these were new customers to the AA's
insurance business. The success of the underwriter has also
contributed to the first increase in motor policy numbers within
our broking business since 2008.
The external environment has been less than helpful following
three successive rises in Insurance Premium Tax (IPT) which will
have doubled the rate from 6% before November 2015 to 12% from June
2017. We have managed to protect our Members by absorbing some of
this price rise, but this is an industry-wide challenge and we will
need to review our pricing policy in the context of any future
increase in IPT. We continue to invest in the quality and range of
our Membership services. In this way we seek to mitigate the
possible impact of price rises on the propensity of both new and
existing Members to purchase our product.
Our most recent refinancing exercise in December 2016 has
reduced our annual cost of borrowings by GBP10m, bringing the
cumulative savings achieved since the IPO in June 2014 to GBP75m
per annum. This reduction in interest costs, combined with much
lower capital spend as our transformation programme nears
completion, means that we should begin to see significant
improvements in the cash flows available for debt repayment. We
will continue to explore ways of further reducing our debt service
costs as opportunities present themselves.
Looking forward, the resilience and underlying strength of the
AA is clearly evident and the outlook remains positive. We are
confident of achieving further progress in the 2018 financial
year.
Enquiries
Investors - The AA IR
Jill Sherratt +44 20 7395 7301
James Curran +44 20 7395 7443
Media - Headland Consultancy
Francesca Tuckett +44 20 3805 4822
Lucy Legh +44 20 3805 4822
This information is provided by RNS
The company news service from the London Stock Exchange
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