AA profits suffer drastic fall, but CEO remains positive

Roadside assistance provider AA saw its profit fall significantly in the six months ended 31 July, as financing costs rose.

In its first set of half-yearly results since its initial public offering in June, the company said profits fell to £10.2m from £121.2m in the corresponding period in 2013, while revenues rose 1.6% to £491.7m.

AA said the decline in profit was attributable to a rise in expenses, with £138.6m worth of financing costs and £39.4m of exceptional costs contributing to a £1m year-on-year increase in cost of sales.

In a statement, the company said the rise in cost of sales was down to the “full impact of increased financing costs resulting from the refinancing put in place by the previous owners”.

"There is some distorted effect to the profit before tax due to the one-off costs of the IPO and we had a full-year interest charge from the refinancing," said group executive chairman Bob Mackenzie.

AA endured a complicated first day of trading in June when its shares lost 2.4%, but the results are likely to generate mild optimism among investors, particularly as shares have soared 28% since the listing.

“The new executive team has focused on getting to know the business in detail, assessing the business operations and infrastructure and developing the strategy for future long term growth,” said Mackenzie.

AA said that in the future it aims to capitalise on the strength of its AA brand, as well as making the right investments to enhance its service to members and customers.

AA shares were up 1.97% to 297.75p at 13:05.