Turning around the lumbering AA (AA.), with its huge debt, outdated IT systems and erratic membership numbers, has been slow work. Net debt had reached 6.7 times cash profit at the July half-year mark, despite the sale of the group's Irish operations. However, chief finance officer Martin Clarke says cash flow this year has been spent on transforming the business, which includes investing in new IT systems to fully take advantage of cross-selling opportunities, although the deleveraging process should start to gather pace from next year.
This investment meant operating profit was flat on last year at £132m. The good news was the core roadside assistance business managed to reverse the decline in paid personal members during the final three months of the period, although membership was down 0.6 per cent on the previous year. However, the number of business customers grew to more than 10,000 after the group won the Lex Autoleasing contract. Average income per personal member and business customer was on the rise, bumping margins up 50 basis points to 48.4 per cent.
Competition in the motor insurance market caused a 7 per cent decline in policy numbers, as increasing premiums across the market resulted in customers shopping around more. Trading revenue here was also flat at £64m.
Prior to these figures analysts at Liberum were predicting adjusted pre-tax profit of £179m for the year to January 2017 and EPS of 23.3p, compared with £180m and 23.2p in the previous year.
AA (AA.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 287.9p | MARKET VALUE: | £1.75bn | |
| TOUCH: | 287.5-287.9p | 12-MONTH HIGH: | 315p | LOW: 210p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 17 | |
| NET ASSET VALUE: | * | NET DEBT: | £2.8bn | |
| Half-year to 30 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 466 | -69 | -9.6 | 3.5 |
| 2016 | 457 | 48 | 6.2 | 3.6 |
| % change | -2 | - | - | +3 |
Ex-div: 6 Oct Payment: 28 Oct *Negative shareholders' equity | ||||
