Aviva Plc · LSE:AV.
Aviva — RAC — FY2003 Earnings Presentation
49 slides from Aviva's earnings presentation, Feb 25, 2004
Slide 1: Preliminary Results
1 Preliminary Results Wednesday 25 February 2004 Peter Smith Chairman Andy Harrison Chief Executive Richard Pennycook Finance Director
Slide 2: Our best year yet
2 Our best year yet – Strong revenue growth in Consumer and Business Services – Continuing profit growth and strong cash flow – Simplification and focus – Benefits from investment in service, systems and people – Dividend up 5.7% to 24.3p
Slide 3: Our best year yet - 2003 revenue growth
3 Our best year yet - 2003 revenue growth Consumer Services Business Services Roadside 9% LVL 5% Motoring Business Sols 10% Services 13% Mfrs. Support 3% Windscreens 1% Industrial Sols 14% Total 7% Total 6% Plus new business wins: Motoring Defence: C Vehicles & Vehicle Vehicle Manufacturers: Ford Se
Slide 4: Our best year yet - profits and cash flow
4 Our best year yet - profits and cash flow PBT* £m 86.7 2003 PBT* 90 Up 24% 80 70.2 70 65.1 60 54.6 50 40 30 20 10 0 2000 2001 2002 2003 2003 reduction in Net Debt** 227 334 282 154 net debt £128m *Pre goodwill amortisation and exceptionals **Including asset finance
Slide 5: RAC plc - divisional trading profit
RAC plc - divisional trading profit 5 Profits: Profits: 2002 £42.4m 2002 £10.6m 2003 £51.3m 2003 £19.3m Motoring Consumer & Business Services Services Vehicle Services Manufacturer Support Services Profits: 2002 £31.6m RAC total operations 2003 £31.2m
Slide 6: Growing Consumer
6 Growing Consumer £m 2002 2003 % Revenue - Roadside 183.1 198.7 9 - Motoring Services 51.0 57.5 13 - RAC Auto Windscreens 96.0 96.9 1 Total Revenue 330.1 353.1 7 Profit 43.2 51.3 19 Continuing operations
Slide 7: Growing Consumer Themes
7 Growing Consumer 33 Themes Themes Grow Leverage the Strengthen Motoring brand and Roadside Services customer base
Slide 8: Consumer Services - strengthen Roadside
8 Consumer Services - strengthen Roadside 2002 2003 % Revenue £183.1m £198.7m 9 Membership 2.11m 2.19m 4 Consistent membership growth over 4 years – membership renewal rate 83% (2002, 83%) Strong service performance – higher fix rate – faster response times – Roadside customer satisfaction 86.3% (20
Slide 9: Consumer Services - product and service initiatives
9 Consumer Services - product and service initiatives RAC Solutions in line with plan – 320k members have already migrated – car check has 93% approval rating Part of wider product range – target right product to each segment RAC - “Always there”
Slide 10: Consumer Services - grow Motoring Services
10 Consumer Services - grow Motoring Services Legal Services Sales: 2002 £8.1m 2003 £10.3m – 27% sales increase - 4 years of outstanding growth – Profits increase by 36% – 2.1m legal expense policies sold (up 20%) – 19.4k personal injury claims handled (up 8%) Financial Services Sales: 2002 £2.5m 20
Slide 11: Consumer Services - grow Motoring Services (BSM, Windscreens)
11 Consumer Services - grow Motoring Services BSM Sales: 2002 £28.5m 2003 £31.8m – 12% sales increase - 3 years of double-digit growth – Profits increase by 17% – Number of instructors increases by 10% RAC Auto Windscreens Sales: 2002 £96.0m 2003 £96.9m – A challenging year; supplier recall in Q4 –
Slide 12: Consumer Services - leverage the brand
12 Consumer Services - leverage the brand – CCM systems platform implemented, legacy systems retired – Marketing efficiency - £3m pa, being delivered – Customer value benefits will build steadily – Customers buying > 1 product Dec 02* Dec 03 Revised target 11% 13% 20% * Restated for improved data ac
Slide 13: Business Services - trading profit
13 Business Services - trading profit £m 2002 2003 % RAC Business Solutions 0.9 1.4 56 Lex Vehicle Leasing 17.5 19.6 12 Lex Industrial Solutions -3.1 -1.4 Manufacturer Support Services 31.6 31.2 -1 Bus ines s S ervices 46.9 50.8 8 Continuing operations
Slide 14: Business Services - new contracts
14 Business Services - new contracts New Contracts Won: – BA Ground Fleet Services: – 6,300 units, £230m revenue - 10 years – Implementation completed successfully – Further opportunities for growth – Ford: – 20k vehicles initially – £1bn revenue - 7 years (and 3 year run off) – Real growth opportun
Slide 15: Business Services - Business Solutions
15 Business Services - Business Solutions £m 2002 2003 % Revenue 146.3 160.8 10 Profit 0.9 1.4 56 – Revenues up 10% – New motor manufacturer wins – Increasing fleet business – New services introduced to insurance sector
Slide 16: Business Services - Lex Vehicle Leasing
16 Business Services - Lex Vehicle Leasing 2002/03 2001 2002 2003 growth Fleet (000) 93.7 95.7 105.4 10% £m Revenue 192.4 197.9 207.2 5% Re ported P BT 15.7 17.5 19.6 12%
Slide 17: Business Services - Lex Vehicle Leasing
17 Business Services - Lex Vehicle Leasing 2002/03 2001 2002 2003 growth Fleet (000) 93.7 95.7 105.4 10% £m Revenue 192.4 197.9 207.2 5% Reported PBT 15.7 17.5 19.6 12% Provision utilisation -12.6 -9.9 -6.2 - Net PBT 3.1 7.6 13.4 76% Dividend 9.8 10.0 13.3 33% RAC 50%
Slide 18: Business Services - Industrial Solutions
18 Business Services - Industrial Solutions £m 2002 2003 % Revenue 102.9 117.0 14% Loss -3.1 -1.4 55% Lex Mechanical Handling – Reduced trading losses – Harvey and Birchwood sale - £95m gross from disposals – Havelange disposal completed January 2004 – Other negotiations in progress Continuing opera
Slide 19: Manufacturer Support Services
Manufacturer Support Services 19 £m 2002 2003 % Revenue 606.7 627.9 3 Profit 31.6 31.2 - Lex Auto Logistics – DAF loss partly offset by additional Leyland margin – New growth coming through: – BA Ground Fleet Services – Unity - accident repair network Hyundai – Registrations up 10% to 32.2k – Increa
Slide 20: Our best year yet
20 Our best year yet – Strong revenue growth in Consumer and Business Services – Continuing profit growth and strong cashflow – Simplification and focus – Benefits from investment in service, systems and people – Dividend up 5.7% to 24.3p
Slide 21: Richard Pennycook, Group Finance Director
21 Richard Pennycook Group Finance Director
Slide 22: Revenue summary
22 Revenue summary £m 2002 2003 % Consumer Services 330.1 353.1 7 Business Solutions 146.3 160.8 10 LVL 197.9 207.2 5 Industrial Solutions 102.9 117.0 14 Manufacturer Support Services 606.7 627.9 3 Other 5.8 3.3 Total – continuing operations 1,389.7 1,469.3 6
Slide 23: Operating profit summary
23 Operating profit summary £m 2002 2003 % Consumer Services 43.2 51.3 19 Business Solutions 0.9 1.4 56 LVL 17.5 19.6 12 Industrial Solutions -3.1 -1.4 Manufacturer Support Services 31.6 31.2 -1 Group overheads/other -3.6 -5.7 Total continuing operations 86.5 96.4 11
Slide 24: Profit & Loss
24 Profit & Loss £m 2002 2003 % PBIT 81.0 96.1 19 Interest -10.8 -9.4 -13 PBET 70.2 86.7 24 Goodwill amortisation -29.3 -5.6 Operating exceptionals -9.3 -30.2 Exceptional items -8.5 -25.2 PBT 23.1 25.7 11 Taxation -13.1 -16.2 24 PAT 10.0 9.5 -5
Slide 25: Goodwill amortisation and exceptional items
25 Goodwill amortisation and exceptional items £m 2002 2003 Exiting from Mechanical Handling -30.1 -53.7 RAC Auto Windscreens - integration -2.9 - Goodwill amortisation -5.6 -5.6 Disposal of Autocentres -10.3 - Other 1.8 -1.7 -47.1 -61.0
Slide 26: Cash flow
26 Cash flow £m 2002 2003 Operating profit before goodwill 47.6 38.9 Interest paid -9.6 -10.5 Tax paid -10.3 -13.6 Working capital 32.4 -4.5 Depreciation & capital expenditure - net 4.6 36.3 Dividends from jvs and associates 16.2 15.2 Operational cash flow 80.9 61.8
Slide 27: Cash flow
27 Cash flow £m 2002 2003 Operational cash flow 80.9 61.8 Disposals/ (acquisitions) -3.4 90.0 Dividends paid -25.7 -26.9 Other movements -0.3 3.0 Net reduction in debt 51.5 127.9 Closing debt 282.2 154.3 Average debt in year 295.0 211.0
Slide 28: Capital expenditure
28 Capital expenditure £m 2002 2003 Additions Mechanical Handling -36.7 -19.2 BSM vehicles -29.1 -33.1 Rest of Group -45.8 -37.4 Total -111.6 -89.7 Disposals Mechanical Handling 5.5 5.1 BSM vehicles 26.8 30.7 Rest of Group 8.5 12.6 Total 40.8 48.4 Net capital expenditure -70.8 -41.3 Depreciation 73.
Slide 29: Balance sheet
29 Balance sheet £m 2002 2003 Fleet assets 143 10 Goodwill 506 501 Other fixed assets/investments 222 222 Working capital/other -187 -180 Capital employed 684 553 Net debt -282 -154 Shareholders’ funds 402 399 Closing net debt is after offsetting £38m of ring fenced cash and investments
Slide 30: Financial ratios
30 Financial ratios 2002 2003 Interest cover 7.5 10.2 Net debt/EBITDA 2.0 1.3 Underlying tax rate 28% 28% EPS (p) (pre exceptionals) 43.9 54.4 Dividend per share (p) 23.0 24.3 Dividend cover 1.9 2.2
Slide 31: Used car market - annual % change in the CAP composite
Used car market - annual % change in the CAP composite 31 10% 8% 5% 3% 1% 0% -2% -3% -5% -6% -10% -9% 1997 1998 1999 2000 2001 2002 2003 Currently Currentlypricing pricingin in10% 10%reduction reductionover overnext next33years years
Slide 32: Lex Vehicle Leasing: value creation - 10 year view
Lex Vehicle Leasing : value creation - 10 year view 32 £m 80 70 Cumulative cash flow 60 50 40 30 20 10 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 – 2003 dividend up 33% – 34% dividend post tax return on equity – £71m of net cash returns received over 10 years
Slide 33: Delivering continuing growth
33 Delivering continuing growth – Driving our principal services – Growing new propositions – By leveraging our brands and customer base
Slide 34: Driving growth from our principal services
34 Driving growth from our principal services 2003 - c70% of profit contribution 2003 Revenue Future Consumer Growth potential Driving tuition 12% Market growth of 5-7% Roadside 12% Grow membership and value per unit Windscreens Flat Modest Legal 27% Rapid share gain Fleet mgmt & 8% Steady share gai
Slide 35: Additional growth areas
35 Additional growth areas – Financial Services – Legal Services (Accident care) – Defence – C Vehicles – Insurance – Unity – Claims services – Vehicle manufacturers – Ford – Customer support services
Slide 36: Continuing growth
36 Continuing growth Leveraging our brands, customer base & capabilities Motoring Consumers & Businesses Vehicle Services
Slide 37: Additional Material
37 Additional Material Preliminary Announcement 25 February 2004
Slide 38: Like for like PBIT reconciliation 2002/2003
38 Like for like PBIT reconciliation 2002/2003 £m Asset Double 2002 2002 Write Running Like for Actual Paccar offs Costs Like Consumer 45.2 -2.8 42.4 Business Solutions 2.3 -1.4 0.9 LVL 17.5 17.5 Industrial Solutions -0.6 -7.2 -7.8 Business Services 19.2 - -7.2 -4.2 10.6 Man Support Services 23.2 8.
Slide 39: Cash flow - non contract hire
39 Cash flow - non contract hire £m 2002 2003 Operating profit before goodwill 62.4 70.1 Interest -9.6 -10.5 Tax paid -10.2 -14.4 Working capital 35.5 -3.1 78.1 42.1 Depreciation & capital expenditure - net -14.0 -1.4 Net cash flow – non contract hire 64.1 40.7
Slide 40: Cash flow
40 Cash flow £m 2002 2003 Non-contract hire 64.1 40.7 Contract hire subsidiaries -7.0 -6.9 Associates & joint ventures - dividends 16.2 15.2 Operational cash flow 73.3 49.0 Dividends paid -25.7 -26.9 Net acquisition/disposal of businesses -4.3 16.9 Other 0.9 3.5 Net cash flow after financing 44.2 42
Slide 41: Average debt
41 Average debt £m 334 Average debt 350 £m 2002 2003 282 CH 133 78 300 NCH 162 133 Total 295 211 250 200 154 150 100 50 0 12/01 12/02 12/03
Slide 42: Capital expenditure
42 Capital expenditure £m 2002 2003 Non- Non- Contract Contract Contract Contract Hire Hire Total Hire Hire Total Capital expenditure -36.7 -74.9 -111.6 -19.2 -70.5 -89.7 Disposals 5.5 35.3 40.8 5.1 43.3 48.4 Net capital expenditure -31.2 -39.6 -70.8 -14.1 -27.2 -41.3 Depreciation 49.3 24.6 73.9 52.
Slide 43: Services to our major customers - MoD
43 Services to our major customers - MoD Sales: 1999 £11m - 2003 £76m Business Consumer Solutions LVL Transfleet LAL White Fleet - Contract hire - Fleet management RAF White Fleet - Contract hire - Fleet management Driver training Parts supply And potentially: - C Vehicles - Airside Support
Slide 44: Services to our major customers - NU
Services to our major customers - NU 44 Sales: 1999 £18m - 2003 £46m Consumer Business Lex Auto Solutions Logistics Breakdown Claims Management Legal Services Accident repair centres, parts supply Windscreens
Slide 45: Growing long term business
Growing long term business 45 £m 2001 2002 2003* 4,000 3,500 250 3,000 610 C Vehicles 2,500 739 842 789 Inventory Mngt 2,000 RAC Subs 767 410 RAC Bus Sols 1,500 685 Contract Hire 357 404 1,000 1407 500 849 922 0 £2,733m £2,832m £3,466m * Includes C Vehicles - currently preferred bidder
Slide 46: Joint ventures/associates - profile
46 Joint ventures/associates - profile £m 2002 2003 RAC Equity Lex Vehicle Leasing 38.6 40.1 Transfleet 10.5 9.6 Hyundai Car Finance 6.1 5.9 Debt (RAC share) Lex Vehicle Leasing 295.2 321.4 Transfleet 56.6 53.4 Hyundai Car Finance 75.0 87.3
Slide 47: Lex Vehicle Leasing - dividend value creation
47 Lex Vehicle Leasing - dividend value creation £m 15 10 5 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 -5 -10 -15 -20 -25 Cumulative Cumulativecontribution contributionto toRAC RAC--£71m £71m(RAC (RACshare) share)
Slide 48: Lex Vehicle Leasing - 2000 residual value provision
Lex Vehicle Leasing - 2000 residual value provision 48 Provision £m Made Used Balance Cars returned to 31 Dec 2002 31.9 -22.5 9.4 Cars returned in 2003 8.5 -6.2 2.3 Cars still to be returned 4.6 - 4.6 Total 45.0 -28.7 16.3 RAC Share (50%)
Slide 49: Service awards 2003
Service awards 2003 49 RAC plc Lex Vehicle Leasing Medium Sized Pension Scheme of the Year, Service Supplier of the Year, Fleet Excellence Pensions magazine Awards Best Contract Hire Company, Fleet Excellence RAC Business Solutions Awards Best Accident Management Provider, Fleet Best personal leasin