New boss Bob Mackenzie vowed to capitalise on the strength of the AA's brand today as the roadside assistance business released its first set of results since its £1.4 billion June flotation.
The motoring organisation, with around four million members, saw sales lift 1.6% to £491.7 million in the six months to July 31 as it won new contracts from VW, Hyundai and Porsche.
But its pre-tax profit plummeted almost 92% to £10.2 million, after incurring £178 million of flotation and financing costs run up by the firm's previous private equity owners CVC, Permira, and Charterhouse.
The AA is now run by a management buy-in team led by former Green Flag boss Mr Mackenzie and backed by institutional investors including Aviva and Legal & General, who floated the business three months ago.
The motoring group said its breakdown services membership reduced by 2.2% to 3.96 million, while the average amount it made from each member lifted 5.8% to £128. This was partly achieved by raising its online rates during the period.
The AA said sales from its insurance services fell 4.2% to £72.3 million, as it signed fewer insurance policies.
The business had 2.2 million policies in force, compared to 2.4 million in the same period a year ago, although income per policy rose 3.1% to £66.
Brokers expect the AA new management to sell more insurance policies to its membership now it is a stand alone business.
The new AA management said its priorities were to strengthen its breakdown business, invest in online services and cut debt.
Mr Mackenzie said: "The business continues to perform satisfactorily and the board expects the full-year to be in line with market expectations."
He added: "Our task is to better capitalise on the strength of the AA brand; make the right investments to enhance our service to members and customers, and reduce the leverage of the business."
The firm said its sales growth was driven by its roadside assistance business, which accounts for 80% of its earnings.
It added it was able to re-sign its largest customer Lloyds Banking Group to a five-year deal in April, and said that its VW contract alone represented 20% of new car sales in the UK.
The AA said its current contracts with manufacturers mean that it provides breakdown cover to 68% of the UK's new vehicle market.
Shares lifted almost 2%.
Analysts at Cenkos forecast the firm's bottom-line full-year pre-tax profit will fall 58% to £82 million, as it will still feel the effect of complex one-off debt financing, management buy-in and flotation charges.
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