Profits plunged at AA last year as breakdown service ploughed more money into road patrols and digital turnaround plan
Profits plunged at the AA last year as the breakdown service ploughed more money into road patrols and a digital turnaround plan.
It is banking on drivers willing to pay higher fees than its rivals for a more extensive service that will include plug-in technology to diagnose problems, predict breakdowns and tell patrols where the customer’s car is if it runs into trouble.
The Smart Breakdown service has already been launched to new members and will be extended to existing customers next year.
The overhaul is the brainchild of the AA’s tech-savvy chief executive Simon Breakwell, who co-founded Microsoft spin-off Expedia. Higher spending on its smart systems shake-up, and more patrols and staff, cost it £26m last year, and were part of the reason why profits dived 62 per cent to £53m.
Revenues rose from £960m to £979m, but the number of drivers with AA accounts fell by 80,000 to 3.21m. The average time it took to arrive at a call-out fell from 50 minutes to 43 minutes.
The AA is also expanding its insurance arm, with the number of motor policies sold rising 16 per cent to 731,000. It expects the splurge on technology to keep customer numbers stable this year with a rise in 2020. Breakwell said: ‘We have spent the past year stabilising the operations – this year is about launching new services.’
It managed to renew several of its largest contracts last year, with companies including Lloyds Banking Group, Volkswagen and Jaguar Land Rover. Separately, it also announced it had signed a three-year contract with insurer Admiral offering roadside assistance to its 4.3m UK motor insurance customers.
The AA’s share price yesterday rose 0.8 per cent, or 0.7p, to 91p but that will be of little comfort to investors who have been hammered since AA floated at 250p a share in 2014. Shares peaked at 432p in early 2015.
The total dividend for shareholders was 2p in 2018, down from 5p the year before.