AA’s (LON:AA) motor insurance division has experienced a “solid” operational performance throughout the financial year ending 31 January 2019. However, its roadside breakdown business continues to stumble. This was announced in a pre-closing trading update on Tuesday ahead of its full financial year results announcement on 3 April.
Trading EBITDA is expected to not be below then £340 million mark, which remains within the company’s guided range of £335 million – £345 million.
In September, AA announced that its profits had dropped by 65% for the first six months of 2018.
In February, it warned that its full-profit would fall short of expectations.
The AA’s insurance division continues to perform in line with the company’s expectations. Over the year, motor policy grew 16% to 731,000 which is ahead of expectations. Additionally, its house insurance policy book rose by 1.5% to roughly 830,000.
As for roadside, the AA retained for extended all of its primary contracts. These include contracts with Lloyds Banking Group, Volkswagen Group, Suzuki, and Jaguar Land Rover.
Average income per business customer increased by 5% to £21, according to the AA this reflects the new contract wins and additional revenue recognised under its pay-for-use contracts.
Average income per paid member increased to £162, growing 3% from last year. This increase remains broadly in line with inflation.
Paid personal memberships dropped by 2% to 3.21 million during the year. Retention was just over 80%. The company said it had anticipated the decline in paid personal memberships, primarily due to its previously announced decision to re-phase its summer marketing campaign. This is in addition to the impact of regulatory pressures and continued competitor activity.
AA has said that it continued to experience “strong and predictable” levels of cash conversion. It expected total capex spend for the 2019 financial year to remain broadly in line with its guidance of £105 million.
At 09:13 GMT on Tuesday, shares in AA plc (LON:AA) were trading at +0.37%.