AA : Trading update for the 2018 financial year, 08.02.2018

8 February 2018

AA plc

Pre-close trading update for the year ended 31 January 2018

Trading EBITDA in-line with guidance

AA plc, today publishes a trading update for the 2018 financial year ended 31 January 2018. We expect to deliver Trading EBITDA in line with the guidance of between £390m and £395m as provided in September 2017.

Roadside Assistance

New members grew 7% year-on-year and, despite the challenges of passing through Insurance Premium Tax increases and the costs arising from regulatory changes, retention was broadly flat at 82%. However, paid members declined by c1% to 3.29m, principally as a result of the discontinuation of free roadside membership for AA insurance customers from December 2015. Therefore from December 2016 to December 2017, we no longer had this pipeline of free-to-paid conversion. This represents an impact on paid membership of c70,000.

Total number of breakdowns rose in the year by 1% to 3.68m, but with a pattern of increased volatility. This resulted in increased costs of third-party garaging to supplement our own patrol availability. In the longer term, we believe increased utilisation of the breakdown service drives 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 is used in c30% of the breakdowns that we service. In August 2017, we successfully launched Car Genie, our connected car technology. Where installed, Car Genie has demonstrated a capability to predict up to 1/3 of breakdowns.

Insurance Services and Underwriting

Insurance Services, comprising the broker and our financial services business, continues to perform well. We achieved 6% growth in motor policies to 629,000 which offset the expected 5% decline in home policies to 818,000. Supported by our in-house underwriter and our investment in Insurer Hosted Pricing, we expect further growth in the motor policy book.

Our in-house underwriter continues to grow rapidly and now has 407,000 policies in force, just over half of which are motor policies. Through the value of our data and the strength of our brand we have the potential to grow the total number of policies across our insurance services and underwriting businesses.

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.

Strategy review

As previously announced in September, we are currently reviewing the strategy to ensure that we can continue to build on the strength of our brand and distribution platform. We expect to update the market on this on 21 February.

Enquiries
IR
Jill Sherratt, Head of Investor Relations	[phone]
Zeeshan Maqbool, Investor Relations Manager	[phone]
Media: Finsbury
Jenny Davey	[phone]
Guy Lamming