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AA reports drop in revenues but roadside assistance operation is growing

The AA has reported a year-on-year fall in turnover and profits as it continues with its ‘transformation’ plan.

Revenues for the six months to July 31 were £484.6m, down from £491.7m in the same period in 2014. EBITDA declined from £211.8m to £199.2m.

The AA said trading was in-line with expectations for the full year, and is reflecting the early phase of a major programme of modernisation and transformation as outlined at the year end. 

The significant benefits of the transformation will not begin to be reflected in results until the latter half of the 2017 financial year, it said.

Bob Mackenzie, executive chairman, said: "On IPO we set ourselves three objectives:  to turn the AA into the UK's pre-eminent motoring services organisation, to revolutionise customer experience through investing and embracing new technology and, finally, to reduce group borrowing and the associated interest cost. 

"I am pleased to report early and positive signs that our strategy will deliver our expectations of the AA brand.  Our Roadside Assistance advertising was launched in June and has been well received.  This together with changes to our product offering, pricing and marketing, is showing encouraging new sales, improving retention and slowing the decline in Personal Member numbers. Our digital development is making good progress with take up of the app growing monthly. 

"There is a great deal still to be done, particularly relating to the revenue increases and cost reductions which are contingent on the introduction of our new IT systems.  The first phase of the IT investment is firmly on track and expected to be in place in July 2016.  This is the key step in reaching our three-year transformation strategy which will enable us to capitalise on the strength of the brand, modernise the business and enhance the customer experience as well as, over time, continue to reduce the financial leverage.

Mackenzie said the AA has met one of the original objectives already:  its recent refinancing not only reduced the annual cash interest cost by £45m, but also enabled it to pay a dividend. 

"The AA has once again demonstrated its fundamental strength, stability and hugely cash generative characteristics.  We are confident that we are in line with expectations for the full year and that we will position the AA as the digital brand for all motorists' needs."

In its Roadside Assistance division, its largest business, revenue rose 2.1% to £359.1m. Retention is up one percentage point compared with last year and, while personal members declined 3.9% year-on-year to 3.7m, on a sequential basis the second quarter declined by only 0.3% compared to the first quarter. Average Income per Personal Member rose 6.2% year on year but is expected to moderate as we reduce renewal price increases to improve retention.

It recorded 4.7% growth in business customers to 10m, and said this is mainly due to new VW Group customers following its contract win in 2014.

“We continue to develop our relationships with all our Business customers who are benefitting from buoyant UK new car sales,” the AA added.

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