LONDON (Alliance News) - Roadside assistance firm AA PLC on Wednesday said it escaped the red during the first half after a large reduction in finance costs offset a dip in revenue and said the dividend for the period is a fraction higher.
The company turned to a pretax profit of GBP48.0 million in the half-year to the end of July from the GBP69.0 million loss a year earlier despite revenue in the period falling to GBP457.0 million from GBP466.0 million.
That had a knock-on effect on gross profit, falling to GBP289.0 million from GBP299.0 million, but a reduction in administrative costs meant earnings before interest, tax, depreciation and amortisation remained flat year-on-year at GBP192.0 million. Operating profit also remained flat at GBP132.0 million.
The swing to pretax profit in the first half of 2016 was the result of a huge reduction in finance costs, plummeting to GBP84.0 million from GBP202.0 million a year earlier. Interest on external borrowings fell and a GBP62.0 million charge for early repayments last year was not repeated in the most recent period.
Net debt at the end of June stood at GBP2.80 billion compared to GBP2.81 billion a year ago.
The dividend for the first half was raised slightly to 3.6 pence per share from 3.5 pence.
"Overall the performance of the business has been robust in the first half and we continue to trade in line with expectations. To date we see no impact on our operations from any Brexit related issues and, as we look forward, we believe we are creating significant momentum for the 2018 financial year," said Chairman Bob Mackenzie.
Trading in the second half of the current financial year has been in line with expectations and AA said it sees "no operational impact" for the business spawning from Brexit.
"In the second half of the year we expect free cash flow and net debt reduction, outside of that associated with the Ireland disposal proceeds, to be modest. Thereafter, as we revert to more normalised levels of capex, we expect deleveraging to accelerate," said the company.
AA shares were up 0.7% to 286.90 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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