Annual profits at the AA fell by 64 percent because of spending to launch more roadside patrols and develop new services, such as black box technology that can predict breakdowns, as the 114-year-old group tries to reposition itself as a technology player.
Pre-tax profit fell from £141m to £53m, while revenues climbed from £960m to £979m.
The profit figure was lower because of £26m of spending on its roadside division and a £22m hit from new pensions rules, while a £34m pension credit inflated the previous year’s figure.
The company’s preferred profit measure — trading earnings before interest, taxes, depreciation, and amortization — fell from £391m to £341m, fractionally above expectations of £340m.
The company aims to produce free cash flow from this year, allowing it to begin paying down its £2.7bn debt mountain, a hangover from the private equity ownership before the company floated in 2014.
The 114-year-old company is trying to pivot to become a technology-focused business with black box systems that can predict breakdowns in advance and a larger insurance business.
One of the spending’s aims was to help the company improve the efficiency of its roadside fleet. During the year, the company cut its average callout time from 50 minutes to 43 minutes.
It also reduced its reliance on paying third-party garages to attend callouts it cannot reach.
“We have spent the last yeastabilizingng the operatio; thisis year is about launching the new services,” said Simon Breakwell, the AA’s chief executive.
From this year, the company will roll out telematics services that allow customers to plug a USB stick into their car, which will detect engine problems and automatically alert AA patrols to their issues and locations.
The system can also tell drivers if something is about to go wrong with their car, telling them to pull over.
During the year, the group renewed several of its largest contracts, including Volkswagen and Lloyds Banking Group, and on Wednesday announced it has won a contract with the insurer Admiral that will see it offer breakdown cover to the company’s 4.3 million customers and work on a joint marketing campaign to target younger drivers.
The AA is also trying to grow its in-house insurance arm.
The company’s motor insurance policies rose 16 percent to 731,000 last year, with 339,000 underwritten by the company. Its home unit policies rose 1.5 percent to 830,000, of which the group underwrites 259,000.
The number of paying individual members in its roadside unit fell 2 percent to 3.21m, though revenue per member rose 3 percent to £162.
Business accounts, where people have automatic membership through a garage, car company, or insurer, fell 1 percent to 9.79m.
