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AA 'on course' for flat roadside this year and return to growth thereafter

The insurance business saw continued growth in motor, up 10% and home insurance up 1.2%


Roadside recovery and insurance provider AA PLC (LON:AA.) said that trading was “on course” in the half-year to 31 July, but that the second half of the year would remain its more significant period.

Chief executive Simon Breakwell said he was “confident” of delivering growth in underlying earnings (trading EBITDA) and free cash flow of circa £80mln this year, with the roadside membership base broadly flat this year and will returning to growth in the following financial year.

In the roadside arm, which is expected to contribute more 80% of full year EBITDA, paid memberships are stabilising, with retention levels unchanged at 80% and rising income per customer in line with inflation.

The insurance business saw continued growth in motor, up 10% and home insurance up 1.2%.

After he was appointed in 2017, Breakwell set out a strategy to invest more into new technologies and the front-line customer support to improve the efficiency and predictability of its roadside business

“We are building positive operational momentum across the business as we continue to make significant progress on our strategic plan and on the exciting development of Smart Breakdown, which will further differentiate the AA,” said Breakwell.  

Broker Peel Hunt forecasts that net debt estimate will be trimmed to £2.66bn from £2.7bn at the end-January, reflecting strong underlying cash flow as well as the reducing growth capex/investment.

AA shares were up 4% to 52.35p on Thursday.

Quick facts: AA PLC

Price: 34 GBX

Market: LSE
Market Cap: £211.59 m

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