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Higher borrowing costs weighed on AA’s half-year profit, despite rising demand for breakdown cover and its new insurance products.
The company, which was acquired by private equity groups TowerBrook Capital Partners and Warburg Pincus in 2021, reported pre-tax profits falling from £37m to £22m in the six months to the end of July, while revenue rose 8% to £5.24 billion pounds.
The AA said on Monday that revenue increased as the number of car insurance policies exceeded 1 million for the first time, while classified membership rose 9% to almost 14 million.
However, borrowing costs rose from £62m to £73m in the period, while amortization (write-downs on past purchases including software or other assets) increased from £48m to £54m. AA’s net debt totaled £2.28 billion at the end of July, down slightly from £2.29 billion a year earlier.
The company said that in August, after the end of the reporting period, it bought back 61 million pounds of debt due to be repaid in 2025. The company also refinanced £550m of long-term debt during the six months.
“Despite the continuing challenging economic and competitive environment, positive momentum remains,” the AA said.
Car insurance costs rose to record highs earlier this year as soaring repair prices pushed up compensation amounts. The AA said its insurance business experienced “strong price inflation” and was forced to pass it on to customers in higher prices.
AA was founded in 1905 and has gone through a number of ownerships, including a brief period as a listed company from 2014 to two years ago.
Business customers (such as motorists who get breakdown cover and car services at garages) increased by 12% to 10.67 million, while the number of paying individual customers increased by 1% to 3.27 million.
The company has been increasing the number of patrol officers to reduce the costly use of third-party garages for remote breakdowns. The number of patrols increased to 2,721 from 2,657 during the same period last year.
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