AA suffers £63.6m loss

The AA has fallen to a near-£64m loss in the first half of 2015 as it recorded a pre-tax loss of £63.6m, down from a profit of £10.2m in 2014.

The breakdown recovery firm is still struggling to retain customers. Although the rate of decline in its roadside assistance members slowed, its overall revenue dipped 1.4pc to £484.6m in the six months to the end of July.

That was combined with increased costs, including a £62.1m early repayment charge on the group’s debts, as well as higher marketing and IT expenses.

The AA floated on the stock market last year, but any new shareholders expecting a strong return from a well-known consumer brand will have to wait: ‘The significant benefits of the transformation will not begin to be reflected in results until the latter half of the 2017 financial year,’ the firm added.

The company is hoping to draw greater revenue from financial services, after partnering with the Bank of Ireland to offer credit cards and mortgages alongside its existing insurance businesses.

The firm also added that the impact of hike in insurance premium tax is likely to hit its insurance division.

‘The impact on the AA is that it is likely to create additional churn in both insurance and roadside assistance divisions,’ the AA said.

Executive chairman Bob Mackenzie said, ‘On IPO we set ourselves three objectives: to turn the AA into the UK’s pre-eminent motoring services organisation, to revolutionise customer experience through investing and embracing new technology and, finally, to reduce group borrowing and the associated interest cost.’

He added, ‘I am pleased to report early and positive signs that our strategy will deliver our expectations of the AA brand. Our roadside assistance advertising was launched in June and has been well received. This together with changes to our product offering, pricing and marketing, is showing encouraging new sales, improving retention and slowing the decline in personal member numbers.’

‘There is a great deal still to be done, particularly relating to the revenue increases and cost reductions which are contingent on the introduction of our new IT systems,’ he concluded.