Strategic priorities and achievements

The three-year programme to transform the AA into the UK’s pre-eminent Membership services organisation began at the IPO when we set out three strategic priorities and detailed the required investment. We have since delivered much against these objectives to:

  • Strengthen the AA’s foundations to modernise the platform to become the pre-eminent Membership services organisation in the UK;
  • Revolutionise customer experience through investment in the Membership proposition and new technologies; and,
  • Reduce Group borrowings and the associated interest costs.

In year one of the transformation, the 2016 financial year, we strengthened the foundations across our business.

In year two, the 2017 financial year, we built on those foundations, creating momentum for change and delivering growth:

  • We have reversed years of decline in Membership and seen growth accelerate in the second half of the year. This is the result of modernised digital platforms, the new highly effective marketing approach, and the enriched Membership proposition.
  • We have new channels to Membership and have expanded our offering to existing Members. The new business models in Financial Services and Insurance Underwriting are performing well, with the latter driving growth in motor insurance policies within our insurance broker for the first time since 2008.
  • The new IT systems and the investment in new technology for the patrols have made our operations much more efficient and we continue to take out cost.
  • We are encouraged by our connected car technology trial and its potential, particularly as a tool to pre-empt breakdowns.
  • Following the sale of our Irish business for £130m net of fees, we applied £106m to the repayment of debt and hold the balance for acquisitions or further debt repayment.
  • We further reduced the cost of borrowing by £10m per annum through a refinancing, bringing the total reduction in the cost of borrowing since the IPO to over £75m per annum.

In the 2018 financial year, we expect to realise the transformation of the AA to deliver a stronger, more efficient and modernised platform for growth. Together with our trusted brand, leading position in the industry and excellent service levels, we expect to:

  • Achieve growth based on our leading position and the latent demand in our market - we expect to continue to grow Membership, leverage our new channels and strengthen our business-to-business positioning;
  • Expand our technological capability - we are revolutionising the customer’s experience, driving sales, achieving higher service levels and reducing costs; in addition, we are developing our positioning to take full advantage of connected car technology; and,
  • Build on our brand beyond Roadside Assistance - new businesses, including our in-house Underwriter, Home Services business and Financial Services partnership, fulfil a wider set of consumer and business needs.
    The AA’s sustainable revenue growth is expected to lead to increased free cash flow. We will consider options for the allocation of capital which create value for shareholders, including the repayment of debt.