AA reverses into red with £64m loss

THE new management at roadside rescue firm AA insisted their turnaround plan was on track despite the group reporting a halfyear loss of £63.6m, down from a £10.2m profit last year.

Executive chairman Bob Mackenzie and chief financial officer Martin Clarke blamed years of underinvestment in the business when it was owned by private equity-backed Acromas for the length of the turnaround process. Mackenzie said: ‘We feel we are on track and even slightly ahead.’

But investors were not convinced and shares fell 13pc to 289.6p.

Mackenzie added: ‘I cannot surmise what investors think but the timetable has been clear and we reinforced this in April. We feel more confident than before.’

The group, which floated last year at 250p a share, is shaking up its IT systems to cut the huge number of letters it sends out. This will not be complete until next summer.

Revenue fell 1.4pc to £484.6m in the six-month period to the end of July.

The company had been struggling under huge debts and part of the turnaround plan was to reduce this. It has successfully reduced the annual cash interest cost by £45m but it was hit with a one-off refinancing charge of £87.4m.

However the debt refinancing has allowed it to pay a maiden dividend, and it announced a half year pay-out of 3.5p a share.

The full benefit of improvements is unlikely to be seen until the second half of the 2017 financial year.

Mackenzie said he was tackling three key things to improve the group: strengthening the brand, reducing costs and debt, and investing in new technology.

Although AA is still losing members the rate of decline has reduced, down by 44,000 during the six months to the end of July, and business customers grew.

The group recently launched its first TV advertising campaign in many years and Mackenzie said the reaction was positive.

He also warned an ‘outrageous’ hike in insurance premium tax from November, will affect the business.