AA plc confident of ‘return to growth’ after 65% profit dip

Motoring association AA plc has seen a double-digit drop in half-year profits.

The organisation generated a pre-tax profit of £28m in the six months to July 31 2018, down 65% from £80m in 2017.

Revenues for the period remained steady, growing year on year by 2%, from £471m to £480m.

The AA said that in line with its expectations, paid personal memberships fell to 3,254,000, in comparison to 3,325,000 the year previous.

This was attributed to a fall in customer retention to a rate of 81%, which was impacted by regulatory pressures, including transparency in renewal price, and increased competitor activity.

But the AA said it is implementing a new membership IT system and improvements to its customer retention proposition, both of which are forecast to enhance its paid membership base.

Earlier this year, the organisation announced the launch of a new strategy for growth that puts “service, innovation and data” at the fore. It will focus on developing the AA’s digital product proposition, which is expected to transform the member experience and unlock growth in its Roadside and Insurance arms.

AA plc CEO Simon Breakwell said: “The first half of FY19 has seen exceptional weather conditions, from extreme cold and snow in February and March to the hottest summer in recent memory, with the severe winter also creating a pothole ‘epidemic’ on the UK’s roads.

“All this led to a 15 year high in the number of breakdowns we serviced. Against this backdrop, I am extremely proud of our achievements and to be reporting results in line with our guidance as we continue to build resilience throughout the business.”

He continued: “We are making good operational progress across our Roadside and Insurance businesses and firmly believe that we have the people and strategy in place to unlock the full potential of the AA and crystallise long term value for our shareholders.

“We remain on-track to meet our Trading EBITDA guidance for FY19 and to return to growth thereafter.”