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Higher borrowing costs pushed down half-year profits at the AA, even as demand for breakdown cover and its newer insurance products climbed.
The company, which was bought by private equity groups TowerBrook Capital Partners and Warburg Pincus in 2021, reported that pre-tax profits fell from £37mn to £22mn in the six months to end of July, while revenues rose 8 per cent to £524mn.
The boost to revenues came as the number of motor insurance policies passed 1mn for the first time, the AA said on Monday, while the number of breakdown members rose 9 per cent to just under 14mn.
However, borrowing costs for the period rose from £62mn to £73mn, while amortisation — the writedown of past purchases including software or other assets — increased from £48mn to £54mn. The AA’s total net debt stood at £2.28bn at the end of July, down fractionally on the £2.29bn it recorded a year earlier.
The company said that in August, after the reporting period, it repurchased £61mn of debt that had been due to be repaid in 2025. It also refinanced £550mn of longer-term debt during the six months.
The AA said it had “positive momentum despite the ongoing challenging economic and competitive environment”.
The cost of motor insurance rose to an all-time high earlier this year, as soaring prices for repairs pushed up the value of payouts. The AA said its insurance business had experienced “strong price inflation”, which it had been forced to pass through to customers in higher prices.
Founded in 1905, the AA has passed through multiple ownerships, including a brief recent period as a listed business from 2014 until two years ago.
Business customers, such as motorists who receive breakdown cover alongside a car service from their garage, increased 12 per cent to 10.67mn, while the number of paying individual customers rose 1 per cent to 3.27mn.
The company had been raising the number of patrols it used, in order to cut expensive use of third-party garages for remote breakdowns. The number of patrols came to 2,721, up from 2,657 a year earlier.
