Potholes slam AA in reverse | City & Business | Finance



Extreme weather is blamed for an 8 per cent increase in breakdowns to 1.91 million, “significantly higher” than expectations and forcing the AA to fork out for thirdparty breakdown mechanics on top of its own patrols.

This contributed to a 65 per cent drop in half-year pre-tax profits to £28million despite a 2 per cent rise in revenue to £480million.

Chief executive Simon Breakwell said: “The first half of the year has seen exceptional weather conditions… with the severe winter also creating a pothole ‘epidemic’ on the UK’s roads.”

This put extra strain on the business which is undergoing a threeyear strategic overhaul with the aim of increasing its own patrols and improving its mobile app-based services.

Breakwell said: “Sometimes you have a rubbish winter and sometimes you have a really hot summer. But it is rare that you have a rubbish winter back to back with the hottest summer. So trying to manage all of this transformation when the operation is under extreme load was very challenging for us.”

The number of roadside members fell 2 per cent to 3.25 million but income per member was up 2 per cent at £159.

Motor insurance policy numbers were up 7 per cent.

The AA has recruited 65 more patrollers and is confident that more of its breakdown services will help it retain more members.

Breakwell said: “We firmly believe we have the people and strategy in place to unlock the full potential of the AA and crystallise long-term value for our shareholders. We remain on track to meet our annual pre-tax earnings guidance.”

But this failed to reassure investors as shares plunged 16¼p to 103¼p.

Russ Mould, investment director at AJ Bell, said: “The extremely negative share price reaction likely reflects frustration with the group’s patchy track record since its 2014 float. Its elevated debt level probably makes investors less willing to give it the benefit of the doubt.

“If the share price remains weak the company could be vulnerable.”


Source link


Enjoy our news? Please spread the word :)