(Alliance News) - AA PLC on Thursday said it expects its first-half trading earnings to beat last year and is on track to meet market expectations.
Shares in AA were up 4.0% at 52.14 pence in morning trade in London.
The vehicle breakdown service and motor insurance provider forecast its trading earnings before interest, depreciation, taxation, and amortisation will be up year-on-year in its financial first half ended July 31, having fallen 17% a year before to GBP161 million.
AA's trading Ebitda excludes finance costs, exceptional operating items, share-based payments, and pension service charge adjustments.
Trading Ebitda for the current financial year, which ends January 2020, is presently in line with market expectations and, as with the previous financial year, will be more heavily weighted toward the second half, AA said.
The roadside rescue service company is also expecting strong growth in its free cash flow to about GBP80 million in financial 2020 - before dividends and a GBP20 million bond buyback - meeting its own guidance. First half free cash flow was roughly GBP40 million excluding the buyback and dividends.
Annual capex is not set to exceed GBP70 million, excluding finance leases net of disposals, meeting guidance.
Within AA's Roadside division, business-to-business income per customer rose 5% in its first half and the number of B2B customers was around 9.0 million. Meanwhile, paid personal memberships fell marginally to approximately 3.2 million. The rate of decline slowed to about 0.5% from 1.1% the year before.
In Insurance, the motor book rose 10% and the home book 1.3%. Due to continuing investment n new business volumes, where average commission is lower, the average income per motor and home policy shrank to GBP67 from GBP69 at the end of financial 2019.
Chief Executive Simon Breakwell said: "We are building positive operational momentum across the business as we continue to make significant progress on our strategic plan and on the exciting development of Smart Breakdown, which will further differentiate the AA. Our award-winning Roadside Assistance business continues to deliver outstanding customer service and we are pleased to report we are stabilising roadside membership. We reiterate our confidence that the roadside membership base will be broadly flat this year and will return to growth in the year to 31 January 2021. Our Insurance business is also performing strongly supported by the growth of our in-house underwriter.
"We are confident we will deliver trading Ebitda growth and strong free cash flow generation this year and remain on course to meet our medium-term growth targets for FY23. Our focus continues to be on delivering long-term sustainable value for our shareholders."