The AA, Britain’s largest motoring organisation, today unveiled a 41 per cent rise in pre-tax profit for the 12 months to the end of January.
From £100 million last time to £141 million, the figure – which does not include results from discontinued operations – translated into earnings per share up 49 per cent from 12.2p to 18.2p.
Again, this excludes figures relating to discontinued operations.
The AA share price powered ahead in early trading by 8.4p, or 7.38 per cent, to 122.15p.
Operating profit, worked out before the deduction of either interest or tax, grew more modestly, from £284 million to £307 million, a rise of eight per cent.
Shareholders were warned in February that the dividend would be reduced, and so it proved. The total dividend per share was cut by 46 per cent, from 9.3p last time to 5p.
The AA has had a turbulent time recently, with the removal in August last year of Bob Mackenzie from his role as executive chairman as well as his roles as a director and an employee of the company. The AA cited gross misconduct.
After this, the roles of chairman and chief executive were split, with John Leach taking on the former position and Simon Breakwell the latter.
On becoming chief executive, Mr Breakwell launched a strategic review of every aspect of the AA’s business. The company, which started life in 1905 as the Automobile Association, now has 15 million members.
AA breakdown coverremains the heart of the business, although, in its own words, it has “branched out” into finance, including AA car insurance, along with leisure and lifestyle services. It is a major player in car insurance UK.
The review concluded, said the company, that “the AA is a phenomenal business and that we could build on our leading position in Roadside [breakdown services], our trusted brand and our highly-skilled and committed employees with a deeply embedded customer service ethos. Our confidence about our ability to realise the opportunities convinced us of the positive long-term outlook for the AA.”
Following the review, the AA is to invest in its businesses in a way that, “while reducing our short-term profitability”, will prove to be “vital to our long-term success”.
Regarding today’s results, Mr Breakwell said: “The AA has delivered a solid performance, in line with guidance, despite the difficult weather conditions.”
Turnover, excluding both discontinued operations and one-off exceptional revenue items, rose two per cent during the year to £959 million, from £940 million.
Mr Breakwell added: “Roadside continues to attract new members at a good rate, with encouraging take up of our digital products...Insurance delivered strong growth as our in-house underwriter drove growth in motor policies.
“These results, together with the reaffirmation by Standard & Poor’s of our Class A notes’ investment grade status, demonstrate the fundamental strengths of the business.”
Looking forward, he said: “We have made a positive start to the 2019 financial year as we begin to execute on our new strategy to put service, innovation and data at the heart of the AA with additional investments to grow Roadside and to accelerate the growth of Insurance.”