25th Mar 2015 13:53
LONDON (Alliance News) - AA PLC Wednesday revealed a GBP935 million equity and debt fundraising in a move designed to allow it to pay dividends for its current financial year and to cut the cost of servicing its existing debt.
The roadside assistance company said it plans to raise GBP200 million by issuing 51.9 million new shares at 385 pence per share and GBP735 million by issuing notes as it refinances and pays off debt, which should save it GBP45 million per year and increase the average maturity of its borrowings to six years. AA shares were down 0.3% at 425.70 pence early afternoon on Wednesday.
With AA's ability to pay dividends restricted until its meets net debt, earnings and cashflow requirements, the company said the new measures allow it to plan a dividend payment of at least GBP50 million for its current financial year and to increase that amount in the following years.
AA listed on the London Stock Exchange in June 2014, when its private equity shareholders Charterhouse Capital Partners, CVC Capital Partners and Permira launched an initial public offering backed by some of the City's top institutional investors, including Capital Research and Management Company, Invesco Asset Management Ltd, Aviva Investors and Blackrock.
Fresh from joining the FTSE 250 index on Monday, AA also reported annual results for the year ended January 31, which showed that pretax profit fell to GBP60.8 million from GBP192.8 million.
Finance costs increased by 49% to GBP266.1 million, illustrating the cost to the company of servicing its existing debt, meaning that the fall in pretax profit was more market than a decrease in operating profit to GBP325.9 million from GBP371.6 million.
The fall in operating profit came even as higher revenue in AA's roadside assistance, driving services and insurance businesses more than offset lower revenue in insurance services and in Ireland, meaning that total revenue increased to GBP983.5 million from GBP973.9 million, an increase that was more than offset by a 21% increase in administrative and marketing expenses to GBP313.5 million.
AA also outlined plans to invest GBP128 million over the next three years, with GBP82 million of that investment to take place in the current 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 net incremental spend is expected to be GBP70 million over the next five years," Bob Mackenzie, executive chairman, said.
The company also wants to restructure so it can be "more competitive, commercially agile and efficient", with the costs of doing so estimated at about GBP45 million over the next three years.
"With considerable natural attrition and reduced property costs, we expect savings of approximately GBP40 million per year once this programme is complete," Mackenzie added.
By Samuel Agini; [email protected]; @SamuelAgini; and Sam Unsted; [email protected]; @SamUAtAlliance
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