We offer a range of products and services within our Roadside Assistance, Insurance Services and Driving Services divisions in the UK and we have a business in Ireland, which replicates most of the operations and activities of the UK.
It is a privilege to present our first Annual Report as a public company. This has been a remarkable year in the history of this remarkable company.
Operationally, the AA continued to deliver excellent service to our millions of customers in the UK and Ireland. Our 3,000 patrols attended some 10,000 breakdowns a day; we sold more than two million insurance policies; and our 2,670 franchised driving instructors taught people to drive. These statistics demonstrate the robust nature and scale of our business.
Read about our strategic priorities by using the right arrow.
Under its previous ownership and during the recent recession, levels of investment in both systems and people were curtailed at the AA.
A fundamental part of our strategic plan is to replace the systems that are constraining our ability to grow our business and depressing our productivity. We are therefore accelerating our investment in systems with expected investment of approximately £128 million over the next three years, of which £82 million is to be invested in the 2016 financial year. We expect this investment to deliver significant savings in IT capital spend in the medium term. Taking into account these savings, the overall incremental spend is expected to be £70 million over the next fie years.
We have appointed an experienced and ambitious executive management team to execute the transformation and drive the business forward. We have also announced plans to increase our London presence to enable us to take maximum advantage of the talent and specialist skills available, particularly in marketing and digital development.
Restructuring of the business is underway to ensure we are more competitive, commercially agile and efficient. One-off restructuring costs are estimated at approximately £45 million over the next three years. With considerable natural attrition and reduced property costs, we expect savings of approximately £40 million per year once this programme is complete.
The AA leads the consumer roadside assistance market with a share of more than 40% which has been achieved by a continual dedication to outstanding service. In September 2014, the AA was awarded Which? Recommended Provider status in its survey of breakdown providers. This was the ninth successive year we held this or the previous Which? Best Buy recommendation. The continued upgrading of “in-van” advanced diagnostic systems has helped to increase our rates of first-time repairs at the roadside. A greater focus on Personal Member retention is already yielding benefits and helping to reduce the loss of Personal Members while maintaining income per Member. We expect to accelerate this through investment in pricing in the current year.
In the future, we will significantly enhance the AA Membership proposition to help reduce customer churn, stabilising and then growing the number of Personal Members in future years.
The AA is a leading provider of new driver training through its two driving schools, British School of Motoring (BSM) and the AA Driving School. In the past the level of take up of Personal Membership from these new drivers has been relatively low but we intend to place greater focus on winning these customers in the future.
We have a significant online presence with theAA.com, recording around 150 million hits per annum. This has been driven largely by the popularity of the AA Route Planner. We also have significant digital content, including breakdown recovery services, education, travel and hospitality guides.
There is an opportunity to enhance customer relationships and commercial performance through a simpler and more coherent online experience. Additionally, we intend to build our mobile expertise to facilitate greater integration between roadside patrols, Members and motor manufacturers. We have recently re-launched the AA app providing a single consolidated portal for many of our services including the ability to request assistance and monitor the location of the allocated patrol in real time. Our current exploration of telematics partnership structures should lead to further enhancement of this customer proposition.
The AA is an iconic brand that is widely recognised and respected. However, the AA has not invested in its brand since 2008, resulting in the lowering of brand awareness. We now plan to support our broader strategic initiatives with an investment in our brand of approximately £10 million per year.
The brand gives us the credibility to market our suite of existing services to a broader customer base. Specifically, there is upside potential in the used car market through the rapidly growing AA Cars website which can also be used as a channel for sales of Roadside Assistance. We also recognise significant opportunity in leveraging our brand to provide AA services to the dealer market. This includes extending AA Warranty, AA Inspections and the creation of a new AA digital service and MOT portal.
In addition, we will ensure we retain our position as the leading provider of driver education and development. We continue to investigate new business areas and evaluate the benefits of additional investment.
We have the market-leading position with motor manufacturers, providing warranty roadside assistance for 67% of all new cars in the UK. In the shorter term, we will develop these customer relationships to present the benefits of extending cover once the warranty has expired. Looking out further, the long-term nature of our Business Customer motor manufacturer relationships, through agreed contracts, will facilitate greater strategic integration and partnership. This will encompass the early adoption of enabling technologies to comply with European directives on car connectivity. In turn this should lead to the provision of new customer-facing services to the motor industry.
The current year will be one of transition and we have developed our strategy and begun making the considerable investment and operational changes which we anticipated at the time of the IPO.
We are accelerating our investment in systems to start the programme of modernisation in the back office and systems. We expect to invest £128 million over the next three years of which £82 million is planned to be invested in the 2016 financial year. We expect this investment to deliver significant savings in IT capital spend in the medium term. Taking into account these savings, the overall incremental spend is expected to be £70 million over the next fie years. However, in order to continue to deliver our first-rate services without disruption, we will continue using old technology and processes while implementing the new.
Restructuring to ensure we are more competitive, commercially agile and efficient will incur one off costs estimated at approximately £45 million over the next three years. Taking into account considerable natural attrition and reduced property costs, we expect savings of approximately £40 million per year once this programme is complete.
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Our AGM is on 9 June 2015. For details and documents visit our Corporate website