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Annual Results

AA revenues up

28 March 2017 07:37

AA's trading revenues rose by 1.6% to £940m in the year to the end of January.

The group said the results were in line with expectations with strong operational cash flow and dividend progression.

Roadside revenue grew 2.5% to £742m with growth in paid personal members (from 3,331,000 to 3,335,000) reversing the long-standing decline.

Retention rose to 82%, despite the increase in Insurance Premium Tax (IPT) and new business volumes grew 14%, driven by new systems, marketing initiatives, advertising and the improved membership proposition.

Average income per member grew 1.3%, a result of improved ancillary sales as price increases were deliberately contained at a time when members were affected by the increase in IPT.

Group Trading EBITDA rose by 0.2% to £403m with organic revenue growth offset by costs associated with increased breakdown incidents, higher insurance aggregator spend and the planned increase in IT maintenance costs.

As a result, the trading EBITDA margin was slightly lower than last year at 42.9% (2016: 43.5%).

Exceptional operating items were £31m, comprising largely £14m of costs associated with the business restructuring.

AA said: "Of the £10m provided for duplicate breakdown cover, £7m is exceptional operating costs and the balance, which is related to accrued interest for refunds, is allocated to exceptional finance costs.

"While dealing with this issue has involved a considerable commitment of management time, it has enabled us to incorporate fairer treatment of our customers and Members into our systems and processes."

Finance costs at £185m (2016: £289m) fell by £104m of which £62m was related to penalty costs incurred in the prior year's refinancing and £31m was due to lower interest on external borrowings following this exercise.

The tax charge for the period was £26m (effective tax rate of 22%) with a current tax charge of £20m and deferred tax impact of £6m.

Profit after tax for the period from continuing operations was £74m compared with a £1m loss in the previous period.

Basic earnings per share from continuing operations were 12.2p compared with a loss per share in the previous period of 0.2p.

Executive chairman Bob Mackenzie said: "The transformation is delivering growth in our Roadside Assistance Membership base and of motor insurance policies, reversing long-term historic declines.

"It has given us a firm platform for sustainable growth.

"We have delivered results in line with expectations, mitigating the increases in IPT and call outs, and paid a progressive dividend.

"In addition, the refinancing reduced the cash cost of debt by £10m per annum, bringing the annualised total reduction since the IPO to more than £75m.

"We are realising the AA's potential.

"We are now capable of building on our technologies, brand and positioning in our markets to take advantage of the abundant opportunities that arise from our ability to fulfil a wider set of consumer and business needs.

"We are more than ever convinced of the potential of the AA as we position it as the UK's pre-eminent Membership services organisation."

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