AA Intermediate Co Ltd Results for the year to 31 January 2015 4 - - PowerPoint PPT Presentation

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AA Intermediate Co Ltd

Results for the year to 31 January 2015

4 June 2015

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AA Intermediate Co Ltd

Headlines

• Robust operating and financial results
• Excellent cash generation
• Strategic priorities announced to transform the AA and position it for growth as part of a

listed group

• Q1 FY16 Refinancing reduces ongoing financing costs
• Continued substantial headroom over covenants

Robust operating and financial results

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AA Intermediate Co Ltd

Performance Highlights

• Revenue of £981.6m up 0.8%
• Trading EBITDA1 of £430.7m
• Trading EBITDA margin 43.9% up 0.5ppt
• Significant cashflow generation with 100.0% cash conversion before tax and

exceptional items

• 7.1% increase in Income per Personal Member to £135 offsetting 4.5% reduction in

Personal Members

• 14% increase in Business customers due to new contract wins
• Motor insurance policies remain stable, offset by reduction in free Home Emergency

policies Increased revenue, Trading EBITDA and margins and strong cash conversion

1Trading EBITDA (earnings before interest, tax, depreciation and amortisation) excludes exceptional items, share-based

payments, acquisition earn-out costs and items not allocated to a business segment.

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AA Intermediate Co Ltd

Transformation overview

• Several years of under-investment under previous ownership
• Period of investment and consolidation to position AA for renewed growth
• To be achieved through
• Investment in brand marketing
• Capex investment in IT transformation
• Investment in people and key skills - new London office to attract digital and marketing talent
• Investment in price and product to stem decline in Personal Members in medium term
• New business initiatives

Investment creates longer term opportunities

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AA Intermediate Co Ltd

Refinancing overview

• Issued £735m new high yield bonds - funds will be used to repay existing Class B

notes in July 2015

• Repaid £209m of Senior Term Facility from existing cash in WBS
• Impact
• Reduced leverage
• Reduced cash interest costs
• Increase average maturity to six years
• Facilitates payment of dividends to parent company
• Simplified debt structure

Transformational transaction

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AA Intermediate Co Ltd

Conclusion

• Robust performance for FY15
• Exciting strategic initiatives announced with substantial investment in business
• Refinancing significantly reduces cash interest cost

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AA Intermediate Co Ltd

Questions

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Appendix

AA Intermediate Co Ltd vs AA PLC

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AA Intermediate Co Ltd vs AA PLC

Profit & Loss

1 European Driving Services business 2 The Insurance Underwriting segment is a wholly owned subsidiary of AA plc and therefore not included in the AA Intermediate Co

Ltd financial results AA Int Co Ltd AA plc Difference Explanation £m £m £m

Revenue 981.6 983.5 1.9 VVCR1 and insurance underwriting2 Cost of sales (344.2) (345.4) (1.2) As above Gross profit 637.4 638.1 0.7 Other operating income 0.1 0.4 0.3 Insurance underwriting Administrative & marketing expenses (297.8) (313.5) (15.7) IPO exceptionals costs & PLC costs Share of profit on joint ventures and associates 0.9 0.9 - Operating profit 340.6 325.9 (14.7) Trading EBITDA 430.7 430.1 (0.6) PLC costs Items not allocated to a segment (6.4) (6.4) - Amortisation and depreciation (48.3) (48.3) - Share-based payments and acquisition earn-out costs (1.9) (1.9) - Exceptional items (33.5) (47.6) (14.1) IPO costs Operating profit 340.6 325.9 (14.7) Finance costs (227.8) (266.1) (38.3) PIK note interest Finance income 0.8 1.0 0.2 Profit before tax 113.6 60.8 (52.8) Tax (expense)/credit 0.2 8.3 8.1 Tax on above Profit for the period 113.8 69.1 (44.7)

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AA Intermediate Co Ltd vs AA PLC

Balance Sheet

AA Int Co AA plc Difference Explanation £m £m £m Non-current assets Goodwill and other intangible assets 1,256.2 1,256.9 0.7 VVCR Property, plant and equipment 99.8 99.8 - Investments in joint ventures and associates 4.1 4.1 - Deferred tax assets 81.4 81.4 - Other receivables 21.2 21.2 - 1,462.7 1,463.4 0.7 Current assets Inventories 5.0 5.0 - Trade and other receivables 185.1 187.1 2.0 Insurance underwriting Current tax receivable 1.2 1.2 - Amounts owed by parent undertaking 1,205.0 - (1,205.0) Amount due to immediate parent of AA Int Co – AA Mid Co Ltd Cash and cash equivalents 261.2 301.5 40.3 IPO proceeds; Prefunded PIK note interest; Insurance Underwriting 1,657.5 494.8 (1,162.7) Total assets 3,120.2 1,958.2 (1,162.0) Current liabilities Trade and other payables (494.6) (498.2) (3.6) PIK note interest accrual Amounts owed to parent undertaking (3.6)

• 3.6 Group relief on PIK note interest

Provisions (8.0) (8.0) - (506.2) (506.2) - Non-current liabilities Borrowings and loans (3,068.0) (3,240.9) (172.9) PIK notes Finance lease obligations (15.8) (15.8) - Defined benefit pension scheme liabilities (434.4) (434.4) - Provisions (12.2) (12.2) - Insurance technical provisions (0.2) (3.9) (3.7) Insurance underwriting (3,530.6) (3,707.2) (176.6) Total liabilities (4,036.8) (4,213.4) (176.6) Net liabilities (916.6) (2,255.2) (1,338.6)

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AA Intermediate Co Ltd vs AA PLC

Cashflow

AA Int Co AA plc Difference Explanation £m £m £m Profit before tax 113.6 60.8 (52.8) IPO costs and PIK note interest Amortisation and depreciation 48.3 48.3 - Net finance costs 227.0 265.1 38.1 PIK note interest Other items 0.6 0.3 (0.3) Insurance underwriting Purchase and disposal of vehicles 14.9 14.9 - Working capital movement (17.1) (16.1) 1.0 Insurance underwriting Net cash flow from operating activities before tax 387.3 373.3 (14.0) Tax paid (8.8) (2.5) 6.3 Group relief on PIK note interest Net cash flow from operating activities 378.5 370.8 (7.7) Investing activities

• Software development expenditure

(31.4) (31.4) - Purchase of property, plant and equipment (5.0) (5.0) - Proceeds from fixed term investments - restricted

• 5.0 5.0 Insurance underwriting

Interest received 0.9 1.4 0.5 Insurance underwriting Net cash flow used in investing activities (35.5) (30.0) 5.5 Financing activities

• Financing transactions

(6.3) (184.8) (178.5) Repayment of PIK notes Issue of share capital

• 199.2 199.2 Issue of share capital on IPO

Interest paid on borrowings (183.7) (220.4) (36.7) PIK note interest Payment of finance lease capital and interest (35.3) (35.3) - Net cash flow from financing activities (225.3) (241.3) (16.0) Net increase in cash and cash equivalents 117.7 99.5 (18.2)