Article date: 11 December 2002
RAC plc (RAC), the motoring and vehicle solutions company, willannounce its preliminary results for the year ended 31 December2002 on 26 February 2003.
RAC will conduct its normal year end round up meetings withanalysts in the coming fortnight ahead of the close period. Thisupdate will form the basis for those meetings.
RAC's underlying profit before goodwill amortisation,exceptional items and taxation in 2002 is expected to be in linewith market expectations.
RAC Consumer Services continues to perform well and hasincreased its individual membership file by over 4% for the thirdconsecutive year. There has been further growth in non-roadsiderevenues, with BSM, Legal Services and Financial Services allsustaining the profit momentum reported at the half year. RACInsure, our new financial services business, comes fully on streamin January 2003 and will provide the platform to significantlyincrease profits earned from financial products.
RAC Business Solutions' underlying business has performed wellwith significant growth in non-roadside revenues following theaward of new outsourcing contracts for claims management fromfinancial institutions and the extension of its existingservices.
We are currently on the short list for contracts with lifetimerevenues of £2.4bn including a major parts distribution contractwhere we have been appointed preferred bidder and for which a pilottrial is currently being undertaken. These contracts will bedelivered using the unique range of skills and products withinRAC's portfolio of which vehicle leasing, mobile maintenance,claims management and logistics are integral parts.
RAC has continued to develop its major strategic IT systems.RAC's automatic despatch system (iCAD) is now fully operational andservice delivery in all key areas is performing normally.
Considerable progress has been made in the implementation of thenew customer relationship management and data warehouse system(CCM) which is now operational for RAC Business Solutions'customers. The implementation for RAC Consumer Services is beingintroduced on a phased basis and will be completed during the firsthalf of 2003. The new system is already delivering significantbenefits as we have been able to retire some of our legacy systemsand improve the quality of our data management and campaignplanning. It is anticipated that additional implementation costs ofabout £4m will be incurred during 2002 as a result of theintroduction of these two systems.
Our contract with Paccar to distribute DAF truck parts will endin June 2003. Our other contract to distribute Leyland parts willgenerate improved margins due to Paccar’s termination ofLeyland production and this is expected to result in additionalprofits of about £7m in 2002. At least the same level of profit isexpected from Paccar in 2003. Contracts with total lifetimerevenues of £185m have been won by our inventory managementbusiness this year.
Our Mechanical Handling businesses have continued to findtrading conditions difficult. The market for used forklift truckshas deteriorated and accordingly accelerated depreciation of about£5m will be taken against the value of the UK fleet to reflectreduced residual values. In addition, partly due to poorer economicconditions in France, an asset impairment of about £6m will berecognised in the 2002 accounts in respect of Lex Manutention.
The additional Paccar revenues, the costs incurred as a resultof the delayed implementation of iCAD and CCM systems in RAC andthe accelerated depreciation in the UK Mechanical Handling businesswill all be separately identified in the segment analysis of ourUnderlying Profit in the preliminary results. The asset impairmentat Lex Manutention will be treated as an operating exceptional itembelow this line.
Lex Vehicle Leasing has continued to improve its profits and hasincreased its fleet size during the second half of the year.Although used car prices have been broadly stable during 2002 theyare expected to fall by 10% over the next three years. We expectthat the provision for residual value losses made at the end of2000 will cover the impact of this reduction for all vehicles nowon the fleet.
In common with other pension funds, the group's pension deficithas increased substantially this year because of the weakperformance of the equity markets. The company's pensioncontributions are expected to increase by £5m a year from themiddle of 2003. The impact of this increase will only apply for thesecond half of 2003.
As we indicated at the interim results, the movement in our debtposition during the second half of the year will be broadlyneutral. During the year we have generated significant positivecash flows.
Paul Hewitt Group Finance Director - 01628 843703
Niall Addison Group Finance and Investor Relations Manager- 07764624701