Aviva Plc · LSE:AV.
Aviva — RAC — H1 2004 Earnings Presentation
41 slides from Aviva's earnings presentation, Jul 28, 2004
Slide 1: Interim Results
1 Interim Results Wednesday 28 July 2004 Peter Smith Chairman Andy Harrison Chief Executive Richard Pennycook Finance Director
Slide 2: Continuing progress
2 Continuing progress – J D Power : RAC is No.1 Roadside Assistance company – Growth in Business Solutions – Growth in Motoring Services – LVL successfully implements Ford contract – Hyundai achieves best ever market share – Exit from Mechanical Handling and Isuzu completed
Slide 3: Continuing progress
3 Continuing progress – Profit before tax* up 4% from £43.1m to £44.9m – EPS up 4% from 27.2p to 28.2p – Net cashflow inflow £31m – Debt reduced to £123m (December 2003, £154m) – Dividend up 5.2% to 10.2p *before goodwill amortisation and exceptionals
Slide 4: Underlying Profit Growth
4 Underlying Profit Growth £m H1 H1 2003 2004 % Reported PBET 43.1 44.9 4 Discontinued operations 2.4 0.1 Continuing operations 45.5 45.0 End of DAF contract -3.8 - Additional Leyland margin -6.7 -5.3 Underlying profit growth 35.0 39.7 13
Slide 5: Growing Consumer
5 Growing Consumer £m H1 H1 2003 2004 % Revenue - Roadside 96.6 101.6 5 - Motoring Services 28.1 33.5 19 - RAC Auto Windscreens 48.9 50.0 2 Total Revenue 173.6 185.1 7 Profits 25.7 26.6 4
Slide 6: Roadside continues to grow
6 Roadside continues to grow H1 H1 2003 2004 % Revenue £96.6m £101.6m 5 Membership 2.19m 2.20m 1 Renewal Rate 83% 83% - Continuing revenue growth – strong renewal rate – higher average revenues No. 1 in Roadside – J D Power survey
Slide 7: Motoring Services continues to grow: Legal and Financial Services
7 Motoring Services continues to grow Legal Services Sales: H1 2003 £4.9m H1 2004 £6.8m – Continuing strong sales growth - up 39% – 13.1k personal injury claims handled (up 22%) – 1.1m legal expense policies sold (up 7%) – successful initiative with regional police forces Financial Services Sales: H
Slide 8: Motoring Services continues to grow: BSM and Windscreens
8 Motoring Services continues to grow BSM Sales: H1 2003 £16.1m H1 2004 £16.8m – Sales growth: 4% – Record number of instructors (3,040) RAC Auto Windscreens Sales: H1 2003 £48.9m H1 2004 £50.0m – Revenues up 2% but lower margins – More robust performance in recent months
Slide 9: Maximising the RAC brand
9 Maximising the RAC brand – CCM systems bedding in – Members buying >1 service, small increase to 13% – Step up requires: – systems fully bedded in – growth in Financial Services – Target 20% over 3 - 5 years
Slide 10: Business Services - trading profit
10 Business Services - trading profit £m H1 H1 2003 2004 % RAC Business Solutions 0.8 2.3 188 Lex Vehicle Leasing 9.5 10.3 8 Manufacturer Support Services* 18.3 12.6 -31 Business Services trading profit ** 28.6 25.2 -12 - end of DAF contract -3.8 - - additional Leyland margin -6.7 -5.3 Business Serv
Slide 11: Business Solutions performs well
11 Business Solutions performs well £m H1 H1 2003 2004 % Revenue 78.7 85.0 8 Profit 0.8 2.3 188 – Improved roadside performance – New contracts and services – customer management centre (Kia) – vehicle inspections (Vauxhall) – growth in France – accident management launched – warranty business exten
Slide 12: Lex Vehicle Leasing continues to grow
12 Lex Vehicle Leasing continues to grow £m H1 H1 2003 2004 % Revenue* 102.5 118.7 16 Profit* 9.5 10.3 8 Fleet size (k) 98.9 125.0 26 – Strong organic fleet growth (10%) – Ford integration successfully completed * RAC share
Slide 13: Manufacturer Support Services
13 Manufacturer Support Services H1* H1 £m 2003 2004 % Revenue 353.9 363.1 3 Profit 18.3 12.6 -31 - DAF 3.8 - - - Additional Leyland margin 6.7 5.3 -21 Hyundai – Registrations up 19% to 19.6k - record market share 1.4% Lex Auto Logistics – Paccar profits in line with expectations – Unity making prog
Slide 14: Success in Defence
14 Success in Defence H1 H1 £m 2003 2004 % Revenue 35.2 37.3 6 – Contracts in place with life time revenues £375m* – Preferred bidder - contracts with lifetime revenues £300m* – Inventory management growth – White Fleet growth potential from 14k to 20k vehicles over 5 years – ASSP - decision likely
Slide 15: Continuing progress
15 Continuing progress – Another half year of good growth – Growth in Motoring Services and Business Solutions – LVL successfully implemented its largest ever contract – Strong performance from Hyundai – Simplification following exit from Mechanical Handling and Isuzu – Good cash flow
Slide 16: Richard Pennycook, Finance Director
16 Richard Pennycook Finance Director
Slide 17: Revenue summary
17 Revenue summary £m H1 H1 2003 2004 % Consumer Services 173.6 185.1 7 Business Solutions 78.7 85.0 8 LVL 102.5 118.7 16 Manufacturer Support Services 353.9 363.1 3 Other 1.5 1.3 - Total – continuing operations 710.2 753.2 6
Slide 18: Operating Profit summary
18 Operating Profit summary £m H1 H1 2003 2004 % Consumer Services 25.7 26.6 Business Solutions 0.8 2.3 LVL 9.5 10.3 Manufacturer Support Services 18.3 12.6 Other -3.5 -2.4 Total continuing operations 50.8 49.4 -3 Discontinued operations -2.4 -0.1 PBIET 48.4 49.3 2 Interest -5.3 -4.4 PBET 43.1 44.9
Slide 19: Profit & Loss
19 Profit & Loss £m H1 H1 2003 2004 % PBIET 48.4 49.3 2 Interest -5.3 -4.4 17 PBET 43.1 44.9 4 Goodwill amortisation -2.8 -2.8 Operating exceptional - VAT - 1.7 Exceptional interest on VAT - 2.0 Exceptional items -24.9 -11.9 PBT 15.4 33.9 120 Taxation -6.0 -12.1 PAT 9.4 21.8 132
Slide 20: Goodwill amortisation and exceptional items
20 Goodwill amortisation and exceptional items £m H1 H1 2003 2004 Exiting from Mechanical Handling -24.9 -11.2 Exiting from Isuzu - -1.5 VAT refund - 1.7 Interest on VAT refund - 2.0 Profit on sale of fixed assets - 0.8 Goodwill amortisation -2.8 -2.8 -27.7 -11.0
Slide 21: Cash flow
21 Cash flow £m H1 H1 2003 2004 Operating profit before goodwill 35.6 36.5 Interest paid -5.9 -2.8 Tax paid -3.2 -8.7 Working capital 10.4 21.4 Capital expenditure - net 0.7 4.3 Dividends from jvs and associates 8.9 8.0 LVL - Ford funding - -14.0 Operational cash flow 46.5 44.7
Slide 22: Cash flow
22 Cash flow £m H1 H1 2003 2004 Operational cash flow 46.5 44.7 Disposals/ (acquisitions) 95.8 12.3 Dividends paid -15.7 -16.8 Purchase of own shares - -9.3 Other movements 2.1 0.6 Net reduction in debt 128.7 31.5 Closing debt 153.5 122.8 Average debt in period 263.2 146.6
Slide 23: Lex Vehicle Leasing - Impairment provision
23 Lex Vehicle Leasing - Impairment provision £m Provision Provision Balance of Made Utilised Provision Cars returned H1 2004 3.0 -0.7 2.3 Cars to be returned 13.3 - 13.3 Total 16.3 -0.7 15.6 RAC Share (50%)
Slide 24: Balance sheet
24 Balance sheet £m Dec June 2003 2004 Fleet assets 10 - Goodwill 501 498 Other fixed assets/investments 222 236 Working capital/other -180 -200 Capital employed 553 534 Net debt -154 -123 Shareholder’ funds 399 411 Closing net debt is after offsetting £31m of ring fenced cash and investments
Slide 25: Financial ratios
25 Financial ratios H1 H1 2003 2004 Interest cover 9.1 11.2 Net debt/EBITDA 1.3 1.1 Underlying tax rate 28% 28% EPS (p) (pre exceptionals) 27.2p 28.2p Dividend per share (p) 9.7p 10.2p Dividend cover 2.8 2.8
Slide 26: IFRS … main areas
26 IFRS … main areas – Affecting RAC and UK plcs – Share options (IFRS 2) - executive and SAYE – Pensions (IAS 19) – Financial instruments (IAS 39) – Affecting LVL – Leases (IAS 17) – profit recognition towards end of contract – reduces short term earnings (timing difference only) – reduces RV impac
Slide 27: Delivering future growth
27 Delivering future growth – Growing our 5 big branded businesses – Delivering our new opportunities – Maximising our brands and customer base – Alive to reinvestment opportunities
Slide 28: Continuing growing in our big 5
28 Continuing growing in our big 5 Profit contribution up 12% H1 Revenue Growth Roadside 8% J D Power : No.1 in Roadside BSM 4% 3000th instructor Windscreens 2% More robust in recent months Legal 39% Continuing steep trajectory Fleet Solutions 14% LVL fleet up 26%
Slide 29: Progressing our new opportunities
Progressing our new opportunities 29 Consumer – Financial Services - Big opportunity – Legal Services - New channels promising, may increase revenue investment B2B – Unity - Slower than expected – Claims Services - New TIG agreement – Motorman outsourcing - Continuing to expand
Slide 30: Business Services – target sectors
Business Services 30 – 5 target sectors Annualised Target Sales (£m) Market – Defence 80 200 – Insurance 105 600 – Vehicle manufacturers 80 300 – Airside 25 100 – Utilities 10 100 Total £300m* £1.3bn – Delivering potential will be combination of: – business as usual – growing our big corporate relat
Slide 31: Reinvestment
Reinvestment 31 – Organic growth remains priority – Reviewing possibilities – Financial Services – Legal Services – RAC “motoring services” – European roadside, warranties, accident mgmt – LVL opportunities – Home. Autumn trial – Remain focused on sustained growth in revenue and shareholder value
Slide 32: Summary
Summary 32 – Another good set of results – growth, offsetting Paccar – On track for our full year objectives – RAC plc stronger and more focused
Slide 33: Additional Material
33 Additional Material Interim Announcement 28 July 2004
Slide 34: H1 2003 restated
H1 2003 restated 34 £m Industrial Manufacturer Discontinued Solutions Support Operations Services Turnover Reported H1 2003 103.2 327.4 - Transfleet -46.4 37.0 9.4 Mechanical Handling -56.8 - 56.8 Isuzu - -10.5 10.5 Restated H1 2003 - 353.9 76.7 Profit & Loss Reported H1 2003 -1.6 17.5 - Transfleet
Slide 35: Capital expenditure (1 of 2)
Capital expenditure (1 of 2) 35 £m H1 H2 H1 2003 2003 2004 Mechanical Handling Additions -16.8 -2.4 -1.8 Disposals 3.6 1.5 1.8 Depreciation 16.6 35.7 3.4 (Profit) / loss on disposal 1.0 -1.5 - Net capital expenditure 4.4 33.3 3.4 BSM Additions -15.7 -17.4 -20.6 Disposals 13.6 17.1 16.8 Depreciation
Slide 36: Capital expenditure (2 of 2)
Capital expenditure (2 of 2) 36 £m H1 H2 H1 2003 2003 2004 Rest of Group Additions -21.1 -16.3 -12.2 Disposals 5.2 7.4 3.4 Depreciation 14.0 10.2 13.4 (Profit) / loss on disposal 0.1 0.7 -0.2 Net capital expenditure -1.8 2.0 4.6 Total Additions -53.6 -36.1 -34.6 Disposals 22.4 26.0 22.0 Depreciation
Slide 37: Average debt
Average debt 37 £m 334 350 Average debt 282 £m FY FY H1 300 2002 2003 2004 CH 133 78 28 250 NCH 162 133 119 Total 295 211 147 200 154 123 150 100 50 0 12/01 12/02 12/03 6/04
Slide 38: Growing long term business
Growing long term business 38 £m FY2001 FY2002 FY2003* H1 2004* 4,000 3,500 250 250 3,000 610 551 C Vehicles 2,500 739 842 789 Inventory Mngt 810 2,000 RAC Subs 767 410 RAC Bus Sols 1,500 685 485 Contract Hire 357 404 1,000 1,407 1,302 500 849 922 0 £2,733m £2,832m £3,466m £3,398m * Includes C Vehic
Slide 39: Joint ventures/associates - profile
39 Joint ventures/associates - profile £m H1 H2 H1 2003 2003 2004 RAC Equity Lex Vehicle Leasing 38.5 40.1 56.0 Transfleet 10.5 9.6 10.4 Hyundai Car Finance 6.0 5.9 5.7 Debt (RAC share) Lex Vehicle Leasing 306.8 321.4 397.3 Transfleet 51.8 53.4 46.5 Hyundai Car Finance 83.6 87.3 94.3
Slide 40: Lex Vehicle Leasing - cash flow
40 Lex Vehicle Leasing - cash flow £m 15 10 H2 5 H1 H1 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 -5 -10 -15 -20 -25 Cumulative Cumulativecontribution contributionto toRAC RAC--£64m £64m(RAC (RACshare) share)
Slide 41: Annual % change in the CAP composite
Annual % change in the CAP composite 41 15% 10% 5% 0% -5% -10% 1997 1998 1999 2000 2001 2002 2003 2004 H1 H2