LONDON (Alliance News) - AA PLC on Wednesday reported a significant drop in annual profit, in line with expectations, on increased investment in the business as the company completes the first year of its turnaround.
AA also announced a new contract with FTSE 100 insurer Admiral Group PLC.
The roadside rescue service firm's pretax profit in the financial year to January 31 more than halved to GBP53 million compared GBP141 million the year before.
The fall in profit followed an investment of GBP26 million by AA into its Roadside and Insurance units as part of its strategic plan. Profit also was "distorted" by a GBP22 million non-cash adjustment for guaranteed minimum pension equalisation and a pension credit of GBP34 million in the prior year.
Adjusted for the pension charge, AA's pretax profit was GBP75 million, in line with the company's expectations.
AA's revenue increased 2.0% in the period to GBP979 million from GBP960 million the year before.
Trading earnings before interest, tax, depreciation and amortisation came in at GBP341 million, in the middle of the firm's guidance range of GBP335 million to GBP345 million.
"One year into our strategic plan we have made significant progress. The results we are announcing today are in line with our previous trading Ebitda guidance and reflect our investment in the business which puts service, innovation and data at the heart of the AA. We recognise there is still a lot to do, but we are building from a position of strength as market leader in breakdown, with best in class customer service, a growing Insurance business and a clear plan to differentiate the AA through digital capabilities and investment in connected car solutions," said Chief Executive Simon Breakwell.
AA is proposing a final dividend of 1.4 pence per share, bringing the total payout for the year to 2p, less than half the 5p paid out the year before.
The company's core Roadside unit saw earnings slip on the increased investment in the business and a drop in paid personal members.
AA's paid personal members decreased 3.0% to 3.2 million, but the company saw a rise of 3.2% in average income per paid personal members to GBP162.
AA attended 3.7 million breakdowns in the period, broadly flat on the year before.
The motoring association said its Roadside revenue was up 3.3% to GBP841 million, driven by its B2B business.
Separately, AA said it has been awarded a three-year contract with insurer Admiral - building on "recent momentum" in its B2B unit.
AA will offer roadside assistance to Admiral's 4.3 million UK motor insurance customers, AA said, though no financial details of the deal were disclosed.
The company's Insurance revenue was down 4.8% on the year before at GBP138 million. AA said "strong" revenue growth from its in-house underwriter offset the lower revenue from its Home Emergency Services consumer business, which it sold in January last year. Excluding the Home Emergency Services, AA's Insurance revenue increased 2.3% to GBP135 million.
The division enjoyed 16% growth in motor policies to 731,000, with its home policy book rising 1.5% to 830,000. AA is targeting 2 million motor and home policies by financial 2023.
The average income per motor and home policy was down 8.0% in the period at GBP69.
AA's administrative & marketing expenses increased 24% to GBP361 million from GBP292 million.
Breakwell added: "Looking ahead, we are confident that our strategic plan will deliver sustainable Ebitda growth and strong free cash flow generation that will enable us to deliver and return long term value for our shareholders."
Shares in AA were up 4.0% Wednesday morning at 93.95 pence each.
