INTERIM RESULTS 24 th September 2019 DEFINITIONS The following - - PowerPoint PPT Presentation

INTERIM RESULTS

24th September 2019

DEFINITIONS

1

The following definitions apply throughout Trading EBITDA (earnings before interest, tax, depreciation and amortisation): excludes share-based payments, pension service charge adjustment and exceptional operating items. Cash conversion: net cash flow from continuing operating activities before tax and exceptional items divided by Trading EBITDA. Adjusted EPS: Earnings per share adjusted for a number of one-offs of which the largest are exceptional operating items, share-based payments, pension service charge adjustment, the write-

• ff of debt issue fees, penalties on early repayment of debt and transfer from cash flow hedge

reserve. Personal members and business customers: measured as the number at the period end.

AA INVESTMENT HIGHLIGHTS

2

One of the UK’s most trusted commercial brands Leading market position High recurring revenue and EBITDA growth with strong cash generation Excellent standards of service delivery Partner of choice for B2B customers Mature, attractive market with significant barriers to entry

VISION FOR THE AA

3

FOUR KEY BUSINESS PERFORMANCE OBJECTIVES

4

Key performance objectives H1 20 performance

Grow B2C membership

• 0.6% H1 20

vs

• 1.2% H1 19

3.19m – membership base stabilising Continue insurance acceleration 803k motor policies Deliver Trading EBITDA growth £165m Stronger free cash flow generation – c.£80m FY20 £44m

+22%

motor

(y-o-y)

+2.5%

(y-o-y)

+214%

(y-o-y)

H1 20 RESULTS IN LINE WITH EXPECTATIONS

5

On-track to deliver strong Trading EBITDA and free cash flow growth in FY20; well placed to meet our medium-term targets for FY23 Roadside membership decline is stabilising; targeting return to growth in FY21 Insurance business delivering strong rates of profitable policy growth with record levels of cross-conversion into Roadside; well positioned to continue to grow strongly in H2 Making strong progress in developing new products and services including the rollout of Smart Breakdown in Q4 New brand marketing campaign launched in July; ‘Drive Smart’ proposition builds on best-in-class roadside customer service delivery New strategic partnership with Admiral. Partnership with BOI strong Putting service, innovation and data at the heart of the AA

FINANCIAL REVIEW

H1 20 FINANCIAL HEADLINES

7

Revenue up 2% at £491m (H1 19: £480m) Trading EBITDA up 2.5% at £165m (H1 19: £161m) and Trading EBITDA margin stable at 33.6% (H1 19: 33.5%) Operating profit up 3% at £120m (H1 19: £116m) PBT up 50% to £42m (H1 19: £28m) Free cash flow generation of £44m (H1 19: £14m)

• £20m bond buy-back programme successfully completed

Rating reaffirmation from S&P Interim dividend maintained at 0.6p

INCOME STATEMENT

8 Revenue up 2% broadly in line with inflation reflecting solid performance across both Roadside and Insurance Trading EBITDA 2.5% higher, in line with expectations

• H1/H2 split expected to be similar to last year
• IFRS 16 impact of £2m, full year impact

expected to be c.£4m

Operating profit 3% higher due to lower exceptional charge, reduction in share-based payments and pension charges offset slightly by higher D&A Finance cost 11% lower due to the early repayment penalty of £15m in the prior period PBT and PAT ahead of last year; adjusted EPS lower due to reduced exceptional costs

Notes: 1 Adjusted for operating exceptional items, share-based payments, pension service charge adjustment, penalties on early repayment of debt, transfer from cash flow hedge reserve for extinguishment of cash flow hedge, write-off of debt issue fees following refinancing, and tax expense

£m H1 20 H1 19 YoY Revenue 491 480 2% Trading EBITDA 165 161 2% Share based payments (2) (3) 33% Pension past service charge adjustment (2) (3) 33% Depreciation & amortisation (41) (34) (21%) Exceptional operating items

• (5)

100% Operating profit 120 116 3% Net finance cost (78) (88) 11% Profit before tax 42 28 50% Tax expense (8) (5) (60%) Profit for the period 34 23 48% Basic EPS – continuing operations (p) 5.5 3.8 45% Adjusted Basic EPS1 – continuing operations (p) 6.0 6.5 (8%)

ROADSIDE AND INSURANCE SEGMENTAL REPORTING

9

Revenue Trading EBITDA

H1 20 H1 19 £m £m Roadside Assistance 387 380 Driving Services 31 31 Roadside Revenue 418 411 Insurance Services 62 61 Insurance Underwriting 11 8 Insurance Revenue 73 69 Group Revenue 491 480 Trading EBITDA Margin H1 20 H1 19 H1 20 H1 19 £m £m Margin % Margin % Roadside Assistance 162 156 41.9 41.1 Driving Services 7 7 22.6 22.6 Head Office costs (32) (31) n/a n/a Roadside Trading EBITDA 137 132 32.8 32.1 Insurance Services 30 33 48.4 54.1 Insurance Underwriting 4 1 36.4 12.5 Head Office costs (6) (5) n/a n/a Insurance Trading EBITDA 28 29 38.4 42.0 Group Trading EBITDA 165 161 33.6 33.5

ROADSIDE PERFORMANCE REVIEW

10 Revenue Up 2% reflecting the benefit of higher B2C income as well as the acquisition of Prestige Paid membership down 2% on H1 19, but only 0.6% down in period. On-track to deliver broadly flat membership this year and a return to growth next year Average income per paid member up 4%, tracking in line with inflation on an annualised basis B2B customers down 7% largely due to non- renewal of Groupe PSA as well as expected decline in new vehicles sales and AVAs Average income per business customer up 5% to £22 reflecting margin improvement across B2B base Trading EBITDA Up 4% reflecting the improved performance of Roadside Assistance

H1 20 H1 19 YoY Revenue (£m) 418 411 2% Trading EBITDA (£m) 137 132 4% Trading EBITDA margin (%) 32.8 32.1 2% Personal paid members (m) 3.19 3.25 (2%) Average income per paid member (£) 165 159 4% Business customers (m) 9.00 9.68 (7%) Average income per business customer (£) 22 21 5% Breakdowns attended (‘000s) 1,648 1,907 (14%)

INSURANCE PERFORMANCE REVIEW

11

Revenue Continued strong growth in motor book

• Supported by profitable growth of underwriter and in particular

non-member scheme

• Insurer Hosted Pricing (IHP) has significantly improved pricing

agility – Aviva to join panel in Q3

Home book growing in line with expectations

• Ongoing investment in improving pricing agility
• IHP roll-out in FY21

Average income per policy reduced to £67

• Reflects investment in new business growth

Financial Services performing well

• Bank of Ireland partnership continues to develop strongly

Trading EBITDA

Additional investment in marketing and competitive pricing strategy to accelerate growth in motor book and home book Trading EBITDA margin decline due to investment in marketing to grow broker as well as slight mix change to lower-margin underwriter revenue

Notes: 1 Includes Home Emergency Services consumer book which was sold in January 2018. Under the terms of the agreement, approximately 70,000 consumer policies are migrating to HomeServe Plc from May 2018 under the AA brand over the next three years. 2 Includes Motor and Home only.

H1 20 H1 19 YoY Revenue1 (£m) 73 69 6% Trading EBITDA1 (£m) 28 29 (3%) Trading EBITDA margin (%) 38.4 42.0 (9%) Total insurance policies2 (‘000s) 1,644 1,475 11% Total Motor policies (‘000s) 803 659 22% Motor policies underwritten (‘000s) 401 258 55% Total Home insurance policies (‘000s) 841 816 3% Home policies underwritten (‘000s) 304 205 48% Average income per policy2 (Motor and Home) (£) 67 73 (8%) Financial Services products (‘000s) 159 136 17%

STRONGER FREE CASH FLOW GENERATION

12

£m H1 20 H1 19 Trading EBITDA 165 161 Exceptional costs (2) (18) Working capital movements 19 17 Pension deficit reduction contributions (12) (13) Net other adjustments (e.g. other operating income and exceptional working capital) (2) 3 Cash flow from operating activities before taxation 168 150 Taxation (4) (10) Capital Expenditure (37) (36) Finance lease capital and interest net of proceeds from sale of fixed assets (11) (11) Acquisitions and disposals (8) (10) Refinancing transactions

• (8)

Net interest paid (64) (61) Free cash flow 44 14 Bond buy-back (20)

• Dividends

(8) (9) Net movement in cash 16 5

Cash conversion above 100% Lower tax in H1 20 reflects lower profitability in FY19 Capex in line with expectations Acquisitions and disposals largely relates to the acquisition of Prestige Slight increase in net interest due to July 2018 refinancing Strong free cash flow generation of £44m (pre-dividends and bond buy- back)

• On-track to generate c.£80m

free cash flow in FY20

CAPEX GUIDANCE MAINTAINED FOR FY20 AND FY21

H1 20 Capex in line with expectations FY20 guidance maintained at c.£70m FY21 guidance maintained

• f c.£60m

£m H1 20 FY20 COMMENTS Additional IT, new initiatives and connected car 23 40

• App and digital development,

investment in membership systems and insurance business. Smart Breakdown and other connected car propositions Growth capex 23 40 IT maintenance 10 21

• Reflects reduction in personnel

capitalised costs in respect of the legacy IT transformation Property and equipment 4 9

• Reduced spend vs FY19 reflects

funding directed to growth capex Maintenance capex 14 30 Total capex 37 70

13

Notes: *Solvency capital for underwriter growth of c.£10m in FY20 to be provided by AA plc and excluded from the breakdown above

PROACTIVE DEBT MANAGEMENT

14

S&P ratings reaffirmed June 2019: A notes: BBB-; B2 notes B+ Forward starting STF available to refinance A3 in July 2020 No immediate refinancing requirements until January 2022 Blended cost of loan notes stable at 4.52% Purchase of 23m B2 notes completed in February 2019 at a cost of £20m Increase in lease obligations of £26m due to adoption of IFRS 16

Facility Amount

• utstanding

Effective maturity Effective interest rate

Class A3 notes £200m Jul-20 4.25% Class A5 notes £700m Jan-22 2.88% Class A6 notes £250m Jul-23 2.75% Class A7 notes £550m Jul-24 4.88% Class A2 notes £500m Jul-25 6.27% Cash in WBS (£71m)

• Class A Net Debt

£2,129m

• 4.26%

Class B2 notes £570m Jul-22 5.50% Lease obligations £83m n/a n/a WBS Net Debt £2,782m

• 4.52%

Bond buy-back (£23m) Jul-22

• AA plc cash

(£61m)

• Total Net Debt

£2,698m

• 4.52%

Forward starting £200m STF available for refinancing

SIGNIFICANT COVENANT HEADROOM AND LIQUIDITY

15 Net Debt for covenant purposes is the net debt in the WBS, presented

• n a pre-IFRS 16 basis
• Lease adjustment is required to

reconcile balance sheet Net Debt to Net Debt for covenant reporting

• Bond buy-back and AA plc cash are
• utside of WBS

Significant covenant headroom available Significant additional liquidity available from £421m banking facilities

• £200 forward starting STF (available

to refinance A3 notes)

• £165m liquidity facility
• £56m working capital facility

£m H1 20 H1 19 Total Net Debt per accounts 2,698 2,668 Less: lease adjustment for IFRS 16 (26)

• Add: bond buy-back

23

• Add: AA plc cash

61 100 Net Debt for covenant reporting 2,756 2,768 Key metrics H1 20 H1 19 FY19 Net Debt/EBITDA1 7.8x 7.4x 8.0x Interest cover2 2.4x 2.5x 2.6x Financial covenants H1 20 H1 19 FY19 Class A FCF to DSCR3 (covenant > 1.35x) 2.9x 3.3x 2.6x Class B FCF to DSCR3 (covenant > 1.0x) 2.1x 2.4x 1.9x

Notes: 1 Total Net Debt to AA plc Trading EBITDA for the last 12 months 2 Run rate cash interest: Trading EBITDA 3 Free cash flow: debt service cover ratio

SUMMARY

16

Solid H1 20 financial performance Delivering; Trading EBITDA growth, Operating Profit growth and strong cash flow generation in FY20 Capex in line with guidance and not expected to exceed £70m in FY20; FY21 guidance maintained at c.£60m Medium-term targets to FY23 maintained Significant cash flow generation enabling deleveraging Interim dividend maintained at 0.6p

BUSINESS REVIEW

The AA’s vision is to “Make Driving Life Simpler + Smarter Everyday”

We’ll do this by delivering the best human & digital expertise, T

• remove the unnecessary hassles from every stage of drivers’ lives

And, in doing so, retain what cars have always promised: The Freedom Of Driving

FY19

DELIVERING OUR STRATEGIC PLAN – 18 MONTHS IN

19

New strategy New management team New brand marketing campaign Insurance growth acceleration Service resilience improvements IT stabilisation People engagement improvements New AA marketing Membership stabilisation New product launches into the base New B2B service and product investments Continued insurance investment and growth Continued employee engagement improvements Roadside membership growth Insurance Trading EBITDA growth Further new product innovations New B2B services embedded Improved business and

• perational efficiencies

Highly engaged and performing company FY20/21 FY21/22

Roll-Out and Scale Innovation Invest in Foundations Accelerate Growth via Differentiation

Sustainable Trading EBITDA growth and significant cash flow generation

DELIVERING ROADSIDE GROWTH

20

New distinctive marketing Improved member engagement Differentiated new products and services Service resilience and excellence

CUSTOMER SERVICE IMPROVEMENT PLAN DELIVERED; INDUSTRY LEADERSHIP POSITION RECOGNISED

21

FY18 Improvements Planned FY19 Actions Taken H1 20 Performance Delivered

Road Operations

Improve:

• Leadership
• Customer perception of AA Service
• Roadside Repair Rate
• Garaging Costs
• Roadside Part Sales
• Accountable Leaders in front line
• Targeted nationwide recruitment
• Investment in Training

COE (Oldbury)

• Continuous Investment in Deployment
• Call to Arrive <45mins (was >50mins)
• Breakdown NPS 75 (was 62)
• Garaging % <8% (was >12%)
• Repair Rate 84.4% (was 83.7%)
• Part sales conversion up 7pts

Contact Centres

Improve:

• Service Levels
• Remote Fix
• App Usage for Breakdown
• Level of automation
• Recruitment;
• New remote fix process and training
• App awareness, functionality

improved

• RPA investment
• 90% service level (was 58%);
• Remote fix increased 30%
• 40% of breakdowns reported or tracked

digitally

• 5x ROI expected within 12 months

AA takes top spot in What Car? Reliability Survey 2018 for best breakdown cover provider AA top of Which? 2019 table for breakdown cover and awarded Recommended Provider status

B2C MEMBERSHIP BASE STABILISED IN FY20 THROUGH OUR PRICING, SALES AND MARKETING ACTIVITY ACROSS ACQUISITION & RETENTION

Significant YoY increase in marketing activity, particularly in Brand & ATL channels Direct response marketing optimised across online / offline channels Target 3 year payback period Expansion of Affinity partnership activity New B2B2C partnerships Leveraged growth of Insurance business with significant increase in breakdown cross-sell New pay for use proposition launched to Driving School students Renewal price increases limited to 2% YoY Continued optimisation

• f Renewal pricing

models Continued price & offer testing in new business channels

Pricing & Promotion Marketing Cross-sell Partnerships Sales

Significant work in STAY AA to train agents in a ‘Model call’ to improve retention rate Enhanced Retention programme planned for H2 FY20 / FY21

22

POSITIVE RESPONSE TO ‘RED DWARF’ CAMPAIGN Campaign Objective:

Demonstrate that the AA is making driving life Simpler and Smarter; Illustrate increasingly differentiated proposition from those of our traditional competitors

Performance to Date:

Average daily app downloads up 50% since campaign launch 1st and 2nd highest ever ad rating for “creative effectiveness” within the Automotive category (System1 AdRatings) 91% positive sentiment on social media

23

PRODUCT AND SERVICE INNOVATION: SMART BREAKDOWN LAUNCH IN Q4

24

Smart Breakdown

Empowering our members to feel car confident Unique features:

Prediction and prevention of c 30% of breakdowns Immediate notification to customers when a vehicle fault is detected Simple, understandable explanation of faults for customers Guidance to customers on action to take to avoid a breakdown Fault data insight surfaced to our Patrols before arriving at a breakdown, improving diagnosis and repair time

Availability:

Digital new business journeys in Q3 Full Launch in Q4 Priced as an upgrade to all standard breakdown cover levels Launch price £5 per month

“If you can’t fix my fleet car, take care of it” End-to-end service, maintenance and repair of fleet from breakdown through to complicated repair “Where do I take my car to get fixed, serviced or MOT” A trusted and transparent place to get your vehicle MOT, serviced or repaired

B2C

EXPANDING OUR OFFERING INTO SERVICE, MAINTENANCE AND REPAIR (SMR)

25

Enables the AA to touch every vehicle in the UK

B2B

WHY SMR? WHAT IS THE OPPORTUNITY?

26 B2B customers want vehicles maintained and repaired B2C car owners want pricing and transparency Lack of visibility on which garages to trust No trusted, reputable “source of truth” Need scale on the demand and supply side (B2B and B2C) Trusted brand Integration of garage networks with parts suppliers Understand SMR supply chain – tech and operational integration Leverages existing scale and

• perational model

UK SMR1 market expected to grow to £28bn by 2022 Clear monetisation opportunities

• Parts/Labour margins
• Garage certification
• Parts supply rates

The need for an SMR proposition Opportunity set Barriers to entry

Notes: 1 Society of Motor Manufacturers and Traders (SMMT), The importance of the UK aftermarket to the UK economy

DELIVERING ROADSIDE GROWTH

27

Roll-out of innovation Technology and data Platform investment High performance culture Operational and service excellence Growing addressable market Scalability ‘Best-in-class’ engagement Speed of execution Operational leverage Sustainable revenue growth Trading EBITDA growth Free cash flow growth Deleveraging

DELIVERING INSURANCE GROWTH

28

Drive more competitive premiums Broaden underwriting footprint New insurance innovation

592 803

Total motor policies

888 830 841

Total home policies

H1- STRONG GROWTH, FINANCIAL PERFORMANCE ON PLAN

29

Performance on track to deliver longer term strategic targets Total policy growth* accelerated to 11% (H1 20) compared to 8% (FY19) Retention rates for motor and home

• n plan

Roadside membership cross-sell rate significantly increased at 32%

Launch of underwriter Launch of underwriter and IHP

Notes: 1 Measured as the total motor and home policy growth over the last 12 months.

Aug-16 Jan-19 Jul-19 Jan-16 Jul-19

FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY19 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY20 Q1 FY20 Q2

Members Scheme Never Members Scheme

STRONG IN-HOUSE INSURER PERFORMANCE - NOW A SCALE PLAYER Proprietary member data significant competitive advantage Continued policy growth, now 401k motor policies and 304k home policies Motor Growth Driven by Strong Never Members Performance:

• Never Members c1/3rd of Insurer motor

policies

• Breakdown cross-sell rates strong
• Claims performance better than plan -

in line with existing members scheme

Insurer Motor Policies

Never Members driving growth

138k 263k

30

H2 - POSITIVE OUTLOOK, WITH CONTINUED STRONG GROWTH IN POLICIES

31

Policy growth expected to be maintained through to the end of FY20

• On-track to deliver 2m policies by FY23

Broker panel to be strengthened with Aviva joining in Q3 FY20 Investment in a new Claims Handling platform, will deliver cost efficiencies for in-House Insurer The launch of enhanced Accident Management service will improve the current customer claims journey and gives an exciting opportunity to provide these services to our member portfolio Young driver product launching

WELL POSITIONED TO DELIVER ON OUR TARGETS

32

Putting service, innovation and data at the heart of the AA

Trading EBITDA growth Significant free cash flow generation

Revenue CAGR From FY19 to FY23 Trading EBITDA CAGR From FY19 to FY23

Roadside Assistance

2 - 5% 3 - 6%

Insurance

6 - 9% 9 - 14%

Group

3 - 5% 5 - 8% Roadside membership growth Insurance Trading EBITDA growth Further new product innovations New B2B services embedded Improved business and operational efficiencies Highly engaged and performing company

APPENDIX

GROUP REVENUE

34

£m H1 20 H1 19 Change % of Group Roadside Assistance 387 380 7 79

• Reflects benefit of higher B2C income and

acquisition of Prestige Driving Services 31 31

• 6
• Flat year on year with renewal of

Bedfordshire, Cambridgeshire and Hertfordshire framework contract and the Police Service Northern Ireland contract within DriveTech Roadside Revenue 418 411 7 85 Insurance Services 62 61 1 13

• As expected, increase reflected the

continued strong growth of our in-house underwriter and benefit from ongoing investment in systems Insurance Underwriting 11 8 3 2

• Continued strong growth across motor and

home book Insurance Revenue 73 69 4 15 Group Revenue 491 480 11 100

TRADING EBITDA

35

£m H1 20 H1 19 Change % of Group Roadside Assistance 162 156 6 98

• Increase in EBITDA reflecting the benefit of

higher average income per paid member, reduction in cost of acquiring new personal paid members and benefit of reduced third- party garaging costs Driving Services 7 7

• 4
• Driving Services EBITDA remains flat year
• n year

Head Office costs (32) (31) (1) (19) Roadside Trading EBITDA 137 132 5 83 Insurance Services 30 33 (3) 18

• Due to impact of ongoing acquisition

marketing spend to accelerate growth in the broker Insurance Underwriting 4 1 3 2

• Growth in Trading Revenue and benefit of

acquisition costs deferral more than offset increased direct costs from growing the motor and home book Head Office costs (6) (5) (1) (3) Insurance Trading EBITDA 28 29 (1) 17 Trading EBITDA 165 161 4 100

RECONCILIATION OF TRADING EBITDA TO OPERATING PROFIT

36

£m H1 20 H1 19 Trading EBITDA 165 161 Pension service charge adjustment (2) (3) Share based payments (2) (3) Amortisation and depreciation (41) (34) Exceptional operating items

• (5)

Operating profit 120 116

RECONCILIATION OF ADJUSTED PROFIT AFTER TAX

37

Adjusted profit after tax broadly flat due to lower exceptional costs; which are added back into the Adjusted EPS figure Basic earning per share 5.5 pence (H1 19: 3.8 pence). Adjusted earnings per share 6.0 pence (H1 19: 6.5 pence)

£m H1 20 H1 19 Profit after tax 34 23 Adjusted for: Exceptional operating items

• 5

Share based payments 2 3 Pension service charge adjustment 2 3 Exceptional finance costs

• 11

Tax expense 8 5 Adjusted profit before tax 46 50 Tax at the effective rate of 19.2% (H1 19: 19.2%) (9) (10) Adjusted profit after tax 37 40 H1 20 H1 19 Weighted average number of shares (m) 614 612 Basic earnings per share (pence) 5.5 3.8 Adjusted basic earnings per share (pence) 6.0 6.5

LEASE PAYMENTS FLAT

Net cash flow from leases net of proceeds from sale of fixed assets were flat in the period

£m H1 20 H1 19 COMMENTS Lease capital repayments 21 18

• Relates predominantly to

vehicle and property leases Lease interest payments 2 2 Total lease payments 23 20 Proceeds from sale of fixed assets (12) (9)

• Relates to sale of

vehicles at end of lease Total lease payments net

• f proceeds from sale of

fixed assets 11 11

38

INCOME STATEMENT

39

£m H1 20 H1 19 Group Revenue 491 480 Cost of sales (192) (197) Gross profit 299 283 Administrative & marketing expenses (180) (167) Other income 1

• Operating profit

120 116 Finance costs (78) (88) Profit before tax 42 28 Tax expense (8) (5) Profit for the year 34 23 Basic EPS (p/share) 5.5 3.8 Adjusted Basic EPS (p/share) 6.0 6.5

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

40

£m

H1 20 H1 19

Goodwill and other intangible assets 1,345 1,316 Property, plant and equipment 55 110 Right-of-use-assets 80

• Investments in joint ventures and associates

5 5 Other receivables 1 2 Financial assets at amortised cost 24

• Deferred tax assets

28 2 Non-current assets 1,538 1,435 Inventories 4 7 Trade and other receivables 237 213 Cash and cash equivalents 132 155 Current assets 373 375 Total assets 1,911 1,810 Trade and other payables (485) (504) Current tax payable (6) (2) Borrowings and loans (200) (15) Lease liabilities (46) (39) Provisions (2) (1) Current liabilities (739) (561) Borrowings and loans (2,530) (2,718) Lease liabilities (37) (14) Derivative financial instruments (1)

• Defined benefit pension scheme liabilities

(251) (86) Provisions (4) (5) Deferred consideration (10) (11) Insurance technical provisions (35) (24) Non-current liabilities (2,868) (2,858) Total liabilities (3,607) (3,419) Net liabilities (1,696) (1,609)

CONSOLIDATED STATEMENT OF CASH FLOWS

£m H1 20 H1 19

Profit before tax 42 28 Depreciation and amortisation 41 34 Net finance costs 78 88 Difference between pension charge and cash contributions (11) (19) Other adjustments to profit before tax (1) 2 Change in working capital 19 17 Net cash flows from operating activities before tax 168 150 Tax paid (4) (10) Net cash flows from operating activities 164 140 Investing activities Capital expenditure net of finance leases capital and proceeds from sale of fixed assets (46) (45) Other investing activities (27) (10) Net cash flows used in investing activities (73) (55) Financing activities Refinancing transactions

• (8)

Interest paid on borrowings (65) (61) Payment of finance lease interest (2) (2) Dividends paid (8) (9) Net cash flows from financing activities (75) (80) Net increase in cash and cash equivalents 16 5

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DISCLAIMER

This presentation contains “forward-looking statements” which are prospective in nature and are not based on historical facts, but rather on current expectations and projections about future events. Such statements are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as “plans”, “expects” or “does not expect”, “is expected”, “is subject to”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements, including business, economic and regulatory changes as well as the risks set out in the Company’s annual report and accounts, which can be found on its website (www.theaaplc.com/investors). Such forward-looking statements should therefore be construed in the light of such factors. Neither the Company, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the events expressed or implied in any forward- looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking

• statements. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation, the Listing Rules

and the Disclosure Guidance and Transparency Rules), the Company is not under any obligation to update, revise or correct any forward- looking statements, whether as a result of new information, future events or otherwise. No statement in this presentation should be construed as a profit forecast or relied upon as a guide to future performance.

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