Aviva Plc · LSE:AV.
Aviva — RAC — H1 2003 Earnings Presentation
39 slides from Aviva's earnings presentation, Jul 30, 2003
Slide 1: Interim Results
1 Interim Results Wednesday 30 July 2003 Peter Smith Chairman Andy Harrison Chief Executive
Slide 2: Another strong performance - highlights
Another strong performance - highlights 2 – Profit before tax* up 30% from £33.2m to £43.1m – excluding £6.7m additional Leyland margin, up 10% – EPS on this basis up 30% from 20.9p to 27.2p – Net cashflow £52m – Debt reduced to £103m - (December 2002 £155m) – Dividend increased by 5.4% to 9.7p *pre
Slide 3: Business highlights
Business highlights 3 Consumer – Roadside sales up 8% – Non-roadside sales up 12% * – Profits increase by 15% to £25.7m * Business Services – LVL profits up by 16% – RAC Business Solutions sales up 12% – New contract wins : revenues of £482m Manufacturer Support Services – Delivering cash value from
Slide 4: RAC plc - trading profit
RAC plc - trading profit 4 Profits: Profits: H1 2002 £21.5m H1 2002 £8.8m H1 2003 £25.7m H1 2003 £8.7m Motoring RAC Consumer and Business Services Services Vehicle Solutions Manufacturer Support Services Profits: * including £6.7m additional H1 2002 £10.6m Leyland margin H1 2003 £17.5m*
Slide 5: Growing Consumer
Growing Consumer 5 £m H1 H1 2002 2003 Growth Revenue Roadside 89.2 96.6 8% Non-roadside* 25.0 28.1 12% RAC Auto Windscreens 49.6 48.9 -1% Total* 163.8 173.6 6% Profits* 22.3 25.7 15% * Like for like - excludes Autocentres
Slide 6: Growth themes: Growing Consumer
Growing Consumer 6 Growth Growth themes themes Leverage Strengthen Growing the strength roadside non-roadside of the brand
Slide 7: Consumer Services - strengthen roadside
Consumer Services - strengthen roadside 7 H1 H1 2002 2003 Growth Revenue £89.2m £96.6m 8% Membership 2.08m 2.19m 5% Renewal rate 83% 83% - – Average revenue per member increases by 4% – RAC Solutions launched July 2003 – Better service delivery – iCAD and rapid deployment trailers working well – Imp
Slide 8: Consumer Services - growing non-roadside
Consumer Services - growing non-roadside 8 BSM Sales up 14% to £16.1m (H1 2002 £14.1m) – profits increase by 27% – number of instructors increases by 11% Legal Services Sales up 32% to £4.9m (H1 2002 £3.7m) – profits increase by 24% – 1.05m legal expense policies sold (up 14%) – 9.6k personal injury
Slide 9: Consumer Services - Financial Services and RAC Auto Windscreens
Consumer Services 9 Financial Services Sales: H1 2002 £1.6m : H1 2003 £1.5m – remodeled arrangement with Axa commenced January 2003 – infrastructure now in place – RAC Insure launched - full panel offering RAC Auto Windscreens Sales: H1 2002 £49.6m : H1 2003 £48.9m – sales flat, profits down 4% – se
Slide 10: Consumer Services - leverage the brand
Consumer Services - leverage the brand 10 Customers buying more than one product: 16% 14% 12% 10% 8% 15% 6% 9% 4% 7% 5% 2% 0% H1 2002 H2 2002 H1 2003 M ilestone CCM – Customer data warehouse in place – Implementation testing now underway – Legacy systems to be retired late Autumn – £1.1m benefits al
Slide 11: Business Services - trading profit
Business Services - trading profit 11 £m H1 H1 2002 2003 RAC Business Solutions 0.4 0.8 Lex Vehicle Leasing 8.2 9.5 Lex Industrial Solutions 0.2 -1.6 Manufacturer Support Services 10.6 17.5 * 19.4 26.2 * including £6.7m additional Leyland margin
Slide 12: Growth themes: Growing Business Services
Growing Consumer 12 Growth Growth themes themes Grow Grow Leverage individual big our businesses relationships capabilities
Slide 13: Business Services: the opportunities
Business Services: the opportunities 13 Target sectors Defence Defence MoD – Roadside – Inspections Norwich – Claims Insurance Insurance – Deployment Union Vehicle VehicleMfrs Mfrs Audi cars/trucks cars/trucks Anglian – Contract hire Utilities Utilities – Fleet mgmt Water – Parts,logistics – Mainten
Slide 14: Growing our major customers - MoD
Growing our major customers - MoD 14 Sales: 1999 £ 11m - 2003 £72m (annualised) RAC RAC Lex Lex Lex Consumer Business Vehicle Transfleet Auto Solutions Leasing Logistics White Fleet - Contract hire - Fleet mgmt 4 4 4 4 4 Driver training 4 Parts supply 4 And potentially: - ‘C’ Vehicles 4 4 4 - Airsid
Slide 15: Growing our major customers - NU
Growing our major customers - NU 15 Sales: 1999 £ 18m - 2003 £45m (annualised) RAC RAC Lex Consumer Business Auto Solutions Logistics Breakdown 4 Claims Management 4 Driver Training 4 Legal Services 4 Accident repair centres, 4 parts supply Windscreens 4
Slide 16: Business Services - RAC Business Solutions
Business Services - RAC Business Solutions 16 £m H1 H1 2002 2003 Growth Revenue 70.3 78.7 12% Profit 0.4 0.8 Doubled – Extending Norwich Union – Supports breakdown infrastructure
Slide 17: Business Services - Lex Vehicle Leasing
Business Services - Lex Vehicle Leasing 17 £m H1 H1 2002 2003 Growth Revenue 95.2 102.5 8% Profit 8.2 9.5 16% – Margin improvement reflects higher quality business – Fleet increases 4% to 99,600 (H2 2002 95,700) – New systems investment delivering benefits
Slide 18: Business Services - Lex Vehicle Leasing
Business Services - Lex Vehicle Leasing 18 Lex Vehicle Leasing – Only 69% of allocated provision utilised for the 11,100 vehicles returned in H1 – Remaining provision of £19m expected to fully cover current fleet – Pricing new contracts assuming 10% reduction in residual values over next 3 years
Slide 19: Lex Vehicle Leasing - dividend value creation
Business Services - Lex Vehicle Leasing 19 Dividend value creation – H1 2003 dividend £7m (H1 2002 £6m) – RAC has received £65m of net dividends over 10 years – Annual dividend represents 25% post tax return on RAC equity
Slide 20: Business Services - Lex Industrial Solutions
Business Services - Lex Industrial Solutions 20 £m H1 H1 2002 2003 Revenue 104.0 103.2 Profit 0.2 -1.6 – Lex Transfleet continues strong progress – BA ground fleet services now operational - £230m, revenues over 10 years covering 6300 units – Lex Mechanical Handling – restructuring and cost reductio
Slide 21: Manufacturer Support Services - Lex Auto Logistics
Manufacturer Support Services - Lex Auto Logistics 21 – Paccar – DAF contract ended June 2003 - total Paccar income similar to 2002 – additional Leyland margin £6.7m – expected to continue, at a declining level, to at least 2005 – Good progress in winning new business – parts supply for British Airw
Slide 22: Manufacturer Support Services - Hyundai
Manufacturer Support Services - Hyundai 22 Hyundai – Registrations up 11% in a flat market – Increased market share (1.2% - H1 2002 1.1%) – Improved model mix, margins sustained – Parts and finance businesses continue to grow
Slide 23: Profit
23 Profit £m H1 H1 2002 2003 PBEIT 38.3 48.4 Interest -5.1 -5.3 PBT(pre exceptionals and goodwill 33.2 43.1 amortisation) Operating exceptionals -0.6 - Goodwill amortisation -3.6 -2.8 Exceptional items -9.0 -24.9 PBT 20.0 15.4
Slide 24: Financial ratios
Financial ratios 24 H1 H1 2002 2003 Interest cover 7.5 9.1 Interest cover – pre Leyland margin 7.5 7.9 Net debt/EBITDA 1.8 1.3 Tax rate on PBT* 28% 28% EPS* 20.9p 27.2p Dividend per share 9.2p 9.7p * pre exceptionals and goodwill amortisation
Slide 25: Cash flow
25 Cash flow £m H1 H1 2002 2003 Operating profit before goodwill 26.5 37.1 Interest -5.2 -5.9 Tax paid -5.6 -3.1 Working capital 32.6 13.7 48.3 41.8 Capital expenditure - net capex -17.0 -18.0 - depreciation 12.7 14.3 -4.3 -3.7 Net cash flow – non contract hire 44.0 38.1
Slide 26: Cash flow
26 Cash flow £m H1 H1 2002 2003 Non contract hire 44.0 38.1 Contract hire subsidiaries -0.5 -3.9 Associates & joint ventures - dividends 7.5 8.9 Operating cash flow 51.0 43.1 Dividends paid -15.1 -15.7 Net acquisition/disposal of businesses 3.8 22.4 Other 0.2 2.5 Cash inflow after financing 39.9 52.
Slide 27: Balance sheet
27 Balance sheet £m Dec June 2002 2003 Fleet assets 143 42 Goodwill 506 503 Other fixed assets/investments 238 236 Working capital/other -187 -199 Capital employed 700 582 Asset finance -127 -50 Net capital employed 573 532 Net debt -155 -103 Shareholders’ funds 418 429 Closing net debt is after off
Slide 28: Priorities for 2003
Priorities for 2003 28 – Continue to deliver growth in – RAC Consumer – Business Services; new contracts – Complete RAC systems investment and deliver benefits – Fix Mechanical Handling – Implement pension changes
Slide 29: Priorities for 2003 - half term report
Priorities for 2003 - half term report 29 – Continue to deliver growth in RAC Consumer – Sales up 6%, profits up 15% – Continue to deliver growth in Business Services – BA Ground Fleet Services, – LVL profits grow by 16% – Complete RAC systems investment and deliver benefits – iCAD, CLAS and CCM del
Slide 30: Outlook - continuing growth
Outlook - continuing growth 30 – Consumer – roadside: product innovation – non-roadside:continuing momentum – further systems benefits – Business Services – extending successful record of contract wins – group capability a winning differentiator – LVL in good shape Full Full year year performance pe
Slide 31: Additional Material
31 Additional Material Interim Announcement 30 July 2003
Slide 32: Profit - H1 2003
32 Profit - H1 2003 £m As Additional CCM Adjusted reported Leyland /iCAD margin Consumer 25.7 1.1 26.8 Business Solutions 0.8 0.6 1.4 LVL 9.5 9.5 Industrial Solutions -1.6 -1.6 Manufacturer Support Services 17.5 -6.7 10.8 Central costs/other -3.5 -3.5 Interest -5.3 -5.3 Adjusted Underlying Profit 43
Slide 33: Profit - H1 2002
33 Profit - H1 2002 £m As CCM / Adjusted reported iCAD Consumer 21.5 0.5 22.0 Business Solutions 0.4 0.2 0.6 LVL 8.2 8.2 Industrial Solutions 0.2 0.2 Manufacturer Support Services 10.6 10.6 Central costs/other -2.6 -2.6 Interest -5.1 -5.1 Adjusted Underlying Profit 33.2 0.7 33.9
Slide 34: Joint ventures - profile
34 Joint ventures - profile £m H1 2002 FY 2002 H1 2003 LVL Transfleet LVL Transfleet LVL Transfleet Turnover 190.5 76.9 395.8 170.8 205.0 92.8 PBT 17.9 2.0 38.2 4.8 20.3 2.0 Fleet assets 755.5 153.0 814.6 158.1 868.5 145.0 Net Debt 538.4 110.3 590.5 113.2 613.7 103.6 Shareholder funds 71.0 22.0 77.2
Slide 35: Annual % change in the CAP composite
35 Annual % change in the CAP composite 15% 10% 5% 0% -5% -10% 1997 1998 1999 2000 2001 2002 2003 H1 H2
Slide 36: Lex Vehicle Leasing - residual value provision
36 Lex Vehicle Leasing - residual value provision 9 9 £m Provision Provision Provision made used remaining Cars returned to 31 Dec. 2002 31.9 -22.5 9.4 Cars returned YTD June 2003 4.9 -3.4 1.5 Cars still to be returned 8.2 - 8.2 Total 45.0 -25.9 19.1 RAC share (50%)
Slide 37: Lex Vehicle Leasing - dividend value creation
37 Lex Vehicle Leasing - dividend value creation £m 10 5 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 -5 -10 -15 -20 -25 Full Year H1 H2 Cumulative Cumulativecontribution contributionto toRAC RAC£65m £65m--(RAC (RACshare) share)
Slide 38: Pensions - managing our commitment
Pensions - managing our commitment 38 Increased Reduced normal cost Some stock company £5.0m pa from mid 2003 market contributions recovery 2003 £2.5m 2004 £5.0m Expected Expectedto tocover cover2/3rds 2/3rdsof of£129m*shortfall £129m*shortfall(December (December2002) 2002) * Net of deferred tax
Slide 39: Awards 2003
39 Awards 2003 RAC Business Solutions Lex Vehicle Leasing – Best Accident Management Provider, – Service Supplier of the Year 2003, Fleet Fleet Excellence Awards Excellence Awards – Top Fleet Software Provider 2003, – Best Contract Hire Company 2003, Fleet RAC Software Solutions - Fleet Excellence A