Strategic priorities and achievements

We set out three strategic priorities at the time of our IPO in June 2014 and in March 2015 we laid out the objectives and investment needed to deliver them. The progression of this programme is set out on pages 12 and 13 of this report.

We have made good progress in our first full year since the IPO and are now well on our way to turning the AA into the UK’s pre-eminent Membership services organisation, taking full advantage of digital opportunities.

Our strategic initiatives are covered in the strategy section of this website. The summary which follows gives a sense of the reach of our ambition and the robustness of the business in responding to these initiatives.

1. Our first strategic priority is to strengthen the AA’s foundations to become the pre-eminent Membership services organisation in the UK.

We have made a very good start in reversing the effect of years of under-investment:

  • We are turning around the core Roadside Assistance business and increasing personal Memberships. We increased the retention rate to 81% (from 79% last year) and the rate of decline in Roadside Assistance personal Members has significantly slowed to -2.6% year on year, which compares with -4.5% last year. Average income per Member rose 4.4% to £141.
  • We are encouraged by the progress and future potential of the recently launched in house Insurance Underwriter and Financial Services partnership with Bank of Ireland.
  • A testament to the excellence of our services was winning the Lex Autoleasing contract this year which helped drive a 6% increase in our business customers.

2. Our second strategic priority is to revolutionise customer experience through investing in the business and embracing new technologies.

We are making Membership more valuable, modernising our operations and becoming more efficient:

  • The transformation of IT systems is critical to strengthening the foundations of the AA. The marketing package of the new Customer Relationship Management system (CRM), was launched in March, ahead of plan. The uploading of data will follow.
  • The digital revolution at the AA is well underway. The app is now used in 11% of personal Members’ breakdowns, improving customer experience and our efficiency. The imminent relaunch of the website and launch of My AA, the online portal for Members, are essential in modernising the business internally and from the perspective of the customer.
  • We have invested in main media marketing with approximately £10m directed to brand advertising. This reinforced our marketing developments, including new product architecture and rewards, which are creating a stronger Membership proposition.
  • We have built on our long history of innovation in creating our Intelematics Europe JV and launching Trakm8 telematics for Fleet and Leasing customers, giving us a strong position for connected car developments.
  • We are making productivity improvements throughout the operations and specifically in the patrol force. These are not only delivering higher service levels but will also lead to greater operational efficiencies.
  • Operational and back office efficiencies have contributed to our cost savings of £8m in the 2016 financial year. This is part of at least £40m net annualised savings, off the 2015 cost base, expected from the 2019 financial year.

3. The third strategic priority is to reduce Group borrowings and the associated interest costs.

Through the refinancing completed in July, we reduced the annual cash cost of servicing our debt by more than £45m. Net debt was £2,809m at 31 January 2016, compared with £2,967m at 31 January 2015.

The refinancing also facilitated the future payment of dividends. In view of the AA’s business model, which is characterised by strong cash generation, our confidence in the transformation plans and the interest cost savings facilitated by the refinancing we intend to pursue a progressive dividend policy.