TIDMAA.
RNS Number : 5650H
AA PLC
08 June 2017
AA plc
Legal Entity Identifier: 213800DTPE4O5OI17349
8 June 2017
For immediate release
AA plc 2017 Annual General Meeting statement and results
Executive Chairman's statement
Today's AGM gives us the opportunity to highlight some of our
achievements since the management buy-in and simultaneous IPO of
the AA almost exactly three years ago.
We acquired the business with the intention of modernising the
AA and transforming it into the UK's pre-eminent Membership
services organisation. We are well on track. There is a great deal
to excite Members, employees and stakeholders.
I shall start with a reminder of what the AA was at the outset
and what we planned to do.
Three years ago:
-- The AA had been deprived of investment in brand and technology.
-- Annual price rises were excessive and retention was falling.
-- New business was nowhere near offsetting the decline in
renewals and Membership numbers were declining at about 4% per
year.
-- Investment not being made to manage costs or improve productivity.
-- There was little sense of what the AA did do or could do for
Members beyond roadside assistance.
But against all that:
-- Service levels had remained high because of the tenacity and talent of the patrol force.
-- Our brand still earned great loyalty and trust.
-- This was one of the most resilient, robust and cash generative businesses anywhere.
In the original prospectus we set out our plan to transform the
AA: strengthening its foundations, revolutionising the customer
experience; and, creating the UK's pre-eminent services
organisation. Simply, our intentions were to:
1. Revolutionise and expand our IT and technical capability.
2. Grow our market leading position in Roadside Assistance, the core of our business.
3. Build on our strong brand.
4. Reduce the cost of borrowings which were too high as a result
of the debt burden the previous owners had put on the AA.
This was always planned as a five-year project including an
initial three years of much needed new investment, which will be
substantially completed in the current financial year. We are
delighted with the progress we have made and believe that we are
approaching an inflection point when the sum total of all that
labour will begin to bear fruit.
Let me summarise what has already been achieved:
We have hugely improved and expanded our technical capability
with a total investment that will eventually amount to close on
GBP130m.
-- In the 2017 financial year we delivered the bulk of our
digital transformation, replacing our website and developing
capability for customers to start self-serving online. Since the
launch of our new website we have delivered double digit year on
year growth in new business sales. In addition, our breakdown app
is now used in 25% of breakdowns - providing a differentiating
benefit to Members.
-- We also completed our new version of AA Help (our bespoke
operational system), which is supporting further efficiency
gains.
-- We have delivered a sophisticated, user-driven pricing engine
which speeds up pricing changes from weeks to hours and facilitates
"flexible" pricing. However, full usage and benefits depend on
migrating all our legacy customers to our new PEGA customer
relationship management (CRM) system.
-- Within our IT infrastructure we have upgraded 8,000 desktop
machines, upgraded 700 servers (hardware and software) to the
latest release, and have upgraded our networks, creating a platform
to deploy our new systems. We upgraded from Windows XP to Windows
10 some 18 months ago.
-- We are currently building our solution to renew customers in
our new policy administration and CRM system. The build remains on
track, and we have begun early stage system.
-- The solution integrates policy administration with our
already delivered investments in our new CRM system and pricing
infrastructure. This combination will give us far greater
flexibility and a step-change in the sophistication of how we
target customers at renewal with the right offer, at the right time
and at the optimum price. We believe that this new capability will
deliver further improvements in our Roadside Assistance retention
rates and average income per Member.
-- Full end-to-end testing of our new Roadside Assistance
renewal capability is scheduled to start in September 2017. We will
then commence two waves of live testing with small cohorts of
customers to validate the operational processes and commercial
benefit with subsequent roll out to all renewing customers.
Turning now to the correction of a decade's under-investment in
the brand. We have improved marketing, established meaningful
rewards for Membership and advertised our Roadside Assistance
services on TV for the first time in nearly a decade.
Our latest advertisement was aired for the first time last
Friday and it is too early to measure its impact. However, one very
telling measure of our success to date - and effective management
of resource - is that our first campaign was seen or heard by an
individual on average 22 times in the first year but 60 times when
it was refreshed a year later.
Overall spontaneous brand awareness has risen remarkably. At the
time of the IPO it was 91% and it has risen to 94% which means that
an extra 1.8 million people are aware of us.
This increased awareness, combined with the much improved
marketing communications and the highly attractive Membership
rewards has led to:
-- Growth in new Members - we reported growth of 14% at the year end.
-- A significant drop in the number of calls from people wanting to cancel their Membership.
-- Increased retention rates - up from 79% at the IPO to 82% last financial year.
Turning around the decline in Membership to a position from
which we can now begin to grow is a very significant achievement in
just three years, especially in light of the increase in IPT and
increased regulatory scrutiny.
Membership - what we are doing to make it more attractive. Our
aim is to become the UK's pre-eminent Membership organisation. We
do this by developing a suite of services and products that are
part of Membership and by improving how we communicate with our
Members. We are only at the beginning of this journey but I will
give you a few examples of our progress to date.
We launched our partnership with Mitchells & Butlers in late
2015 which offers 20% off food and beverage at more than a thousand
of their pubs and restaurants. We are nearing a run rate of one
million redemptions per annum. We are also developing the
technology which enables us to track individual usage so we can
tell Members exactly how much that and other benefits are worth to
them personally.
This is important because we know it drives retention. Members
who engage with our benefits programme have renewal rates over 2%
higher than the average. This increases as the level of engagement
rises and is strongest among our younger Members. We already have
ambitious plans to offer a much wider range of exclusive Membership
benefits and rewards which will further enhance the offering.
The app is an important part of this journey. 35% of our Members
are now registered to use it (up 15 percentage points on last year)
and the Member benefits section is already the third most visited
section.
We also offer much more relevant and personalised communication.
In the past, a quarter of Members received more than five pieces of
communication (usually mail) in the first 40 days of Membership. We
now offer something much more succinct, targeted and personal. The
welcome pack also arrives within eight days compared with 20 days a
year ago.
All this is as a result of our new PEGA marketing system which
will become even more powerful when properly integrated into our
new CRM system
We have also done much to take full advantage of the power of
our brand beyond Roadside Assistance. Our insurance broking
business was started in the 1970s and has grown to become a very
profitable operation in its own right, selling motor and home
insurance policies to nearly 1.5m customers. Our brand
consideration for people buying insurance is one of the highest in
the industry.
However, over the last six years, our insurance business has
suffered, like its peers, through the growth of price comparison
websites which have been largely responsible for a reduction in the
number of motor policies sold by the AA of almost 50%. Our
investment in systems, technology and our underwriter has now
stemmed the decline and we have seen the first growth in the size
of our motor portfolio in eight years.
We recognised that if we could use our data on Members, we
should be able give many of them the benefit of more competitive
pricing. Our underwriter, which was launched in January 2016, takes
advantage of that data. The book now comprises 270,000 insurance
policies, sold mostly to Roadside Members many of whom are coming
into our insurance fold for the first time. This has also helped to
reverse the decline in motor insurance policies sold by our
broker.
We have rebuilt our financial services positioning. In the past,
we made a lot of money from selling financial services and there is
no reason we should not do so again. We launched our partnership
with the Bank of Ireland in August 2015 and are very pleased with
our progress.
There are many other opportunities for the AA brand, in driving
schools, home emergency, used car sales, vehicle inspections among
other opportunities. All of these will play a growing part in the
future of the AA.
Touching on Car Genie, our connected car product which we
launched in April.
We are excited about the potential this brings as a tool for
Members to manage their own vehicles but also for us as a means of
anticipating potential problems. Our trial has shown that we can
remotely predict about a third of breakdowns, enabling us to offer
Members appointments to resolve problems before they cause a
breakdown. This could dramatically change the nature of our
business for the good of Members and our own cost management.
Which brings me onto costs. We have done much to improve
productivity and cut costs throughout the business. We have already
set out our plans to reduce costs off the 2015 cost base of at
least GBP40m from the 2019 financial year, and we are half way
through that plan. As anticipated, we have reinvested some of those
savings as part of the transformation, most notably in the brand
and people.
One of the most material benefits for shareholders has been the
reduction in the cost of servicing our debt. The cost of new
investment and our transformation programme has meant that we have
not yet focused on deleveraging, except through the application of
the GBP106m of proceeds from the sale of our Irish business.
However, we have substantially reduced our interest costs.
The two refinancings since the IPO have reduced the blended cost
of debt from 5.9% to 4.6% which equates to a cash reduction of
GBP78m per annum on interest paid. A great achievement.
Finally, we have are making progress on pensions. This will be
the subject of a separate announcement.
These achievements have only been possible through the very deep
change we have made to the culture of the AA. We have transformed
the way people think about the business and the potential for
improving it, expanding it and growing it, without losing the
quality of service and the values which lie at its core.
In summary, we have created the strong foundations for the UK's
pre-eminent Membership services organisation which is now poised
for growth. We expect revenue growth to lead to higher cash
generation giving us the potential to return more cash to
shareholders, directly or indirectly through debt repayment.
Trading in line. We are trading in line with market expectations
and will announce half year results on 26(th) September.
Bob Mackenzie
Executive Chairman
8 June 2017
Results of the AGM
AA plc (the 'Company') announces that:
(1) In accordance with Listing Rule 9.6.3(1) R and 9.6.18 R,
copies of the resolutions (other than those resolutions comprising
ordinary business) passed by the Company at its Annual General
Meeting ("AGM") held on 8 June 2017 have been submitted to the
National Storage Mechanism and are available for inspection at
www.hemscott.com/nsm.do;
(2) All of the resolutions put to the Company's AGM, with the
exception of Resolution 16, were passed on a show of hands. Details
of the proxy voting instructions lodged for each resolution are set
out below:
Resolution Proxy % Proxy % Total Proxy
Votes Votes Proxy Votes
For (including Against Votes Withheld*
Chairman's Cast (excluding
discretion) votes
withheld)
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
ORDINARY BUSINESS
----------------------------------------------------------------------------------------------------------------
ORDINARY RESOLUTIONS
----------------------------------------------------------------------------------------------------------------
Accounts
and the
1. report 447,981,581 99.92 340,000 0.08 448,321,581 278,113
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Directors'
Remuneration
2. Report 416,215,015 93.13 30,698,628 6.87 446,913,643 1,686,051
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Final
3. Dividend 448,587,508 99.99 9,155 0.01 448,596,663 3,031
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
4. Bob Mackenzie 382,038,559 96.40 14,263,273 3.6 396,301,832 52,297,862
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
Martin
5. Clarke 396,185,213 99.97 108,583 0.03 396,293,796 52,305,898
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
6. John Leach 446,873,033 99.62 1,682,590 0.38 448,555,623 44,071
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
Andrew
7. Miller 447,417,215 99.74 1,166,733 0.26 448,583,948 15,746
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
Andrew
8. Blowers 448,040,761 99.88 543,187 0.12 448,583,948 15,746
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
Simon
9. Breakwell 448,138,391 99.90 445,557 0.1 448,583,948 15,746
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-elect
10. Suzi Williams 448,479,794 99.98 105,465 0.02 448,585,259 14,435
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Re-appointment
11. of auditors 441,048,258 98.43 7,017,234 1.57 448,065,492 534,202
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Remuneration
12. of auditors 442,928,341 98.74 5,663,575 1.26 448,591,916 7,778
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Political
13. donations 371,590,016 82.83 77,006,495 17.17 448,596,511 3,183
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Authorise
directors
to allot
14. shares 339,812,090 75.75 108,781,425 24.25 448,593,515 6,179
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
SPECIAL RESOLUTIONS
----------------------------------------------------------------------------------------------------------------
Disapplication
of pre-emption
15. rights 392,952,854 87.60 55,627,993 12.4 448,580,847 18,847
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Further
disapplication
of pre-emption
16. rights 287,810,711 64.16 160,773,541 35.84 448,584,252 15,442
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Authority
to purchase
17. own shares 446,365,824 99.58 1,865,688 0.42 448,231,512 368,182
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
Reduced
notice
for general
meetings
(other
than annual
general
18. meetings) 434,687,483 96.90 13,902,707 3.10 448,590,190 9,503
---- ---------------- ---------------- ---------------- ------------ ------ ----------------- -----------
* A vote withheld is not a vote in law and is not counted in the
calculation of the proportion of votes for or against a
resolution.
AA plc acknowledges that Resolution 16, in relation to a further
5% disapplication of pre-emption rights, was not passed at the AGM
held on 8 June 2017. Resolution 14, which grants authority to allot
shares, was passed although a high number of votes were received
against it. A process of shareholder consultation has commenced and
we have been informed that some significant shareholders generally
oppose share issuances with pre-emptive rights above 33% and
without pre-emptive rights above 5% and therefore this vote against
is not specific to the AA.
The issued share capital as at 8 June 2018 was 609,806,764. The
total number of proxy votes cast was 448,596,663, which represents
73.6% of the issued share capital of the Company.
Enquiries
Investors
Jill Sherratt, Head of Investor
Relations, AA plc
James Curran, Investor Relations
Manager, AA plc +44 2073957301
Mark Millar, Company Secretary +44 2073954443
and General Counsel +44 1256 493123
Media - Headland +44 2038054822
Francesca Tuckett / Rob Walker
This information is provided by RNS
The company news service from the London Stock Exchange
END
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