AA to release first results following chairman sacking
The AA is expected to report a dip in profits despite a rise in revenues for the first half of the financial year.
The AA will release half-year results on Tuesday, with investors set to scour for any clues on the future direction for the business following the sacking of executive chairman Bob Mackenzie last month.
The roadside assistance firm is currently under the leadership of acting chief executive Simon Breakwell, who replaced Mr Mackenzie after the AA split up the executive chairman role in early August following his surprise firing.
“Management change always creates uncertainty and we expect the acting CEO to be more than just a caretaker. We do not expect a sharp change in strategic direction for the AA however,” Barclays analyst James Rose said in an equity research note.
“Nonetheless, there is uncertainty over his views on: i) the internal focus of the business; ii) employee engagement; iii) the business’ financial structure; iv) the speed & manner with which the investment programme has been implemented.”
Barclays said that given Mr Breakwell’s sales, marketing and digital credentials – having helped establish Uber’s European operations and been a founding member of Expedia – investors would probably welcome news of his permanent appointment.
The group has been leading a turnaround but made a shock announcement last month, saying that first-half performance had been hit by “erratic workload patterns”, as it failed to adequately book roadside patrols to match demand.
Consensus figures are now pointing to a drop in pre-tax profit to £42 million for the six months to July 31, compared with reports of £48 million for the same period last year.
That is despite expectations for a rise in trading revenue from £467 million to £471 million.
The AA flagged last month that it had otherwise enjoyed a “robust” first half, with membership expected to be “marginally” up year-on-year in the first half, at around 3.33 million from 3.32 million last July.
It said this despite upping prices after it passed on the 2% extra insurance premium tax.
Tuesday will mark the AA’s first set of results since Mr Mackenzie was sacked for gross misconduct.
No formal explanation has been provided by the firm, aside from clarifying that it was a personal conduct matter.
But recent reports said Mr Mackenzie allegedly assaulted a colleague in a sustained attack that is said to have lasted minutes.
It has been reported that Mr Mackenzie was upset by plans to split the AA’s insurance division for a potential tie-up with insurer Hastings Group.
Both AA and Hastings came out earlier this month to confirm that while they had held discussions in early summer about a potential deal, those talks had ceased.
Cenkos Securities research analyst Sandy Chen said that the collapsed deal “does highlight the value of the AA’s insurance broking business, which has a circa 2% market share in new motor insurance policies and a 3% share in home insurance”.