AA sees major contract deals help offset shrinking membership

Roadside assistance firm the AA has said full-year profits are set to come in at the top half of expectations as major contract deals help offset falling membership.

The group said full-year underlying trading earnings are expected to be “not less than” £340 million thanks to a solid performance across its roadside and insurance divisions.

The AA had previously guided for underlying trading earnings of £335 million to £345 million.

But this still marks a sharp fall on the £391 million reported for 2017-18 and comes after it saw a 65% plunge in interim pre-tax profits to £28 million as extreme weather sent breakdowns soaring.

In its latest update, the AA said paid roadside assistance personal memberships fell by around 2% to 3.2 million over the year to January 31.

The group, which reports full-year figures on April 3, blamed the decline on competition, regulatory pressure and changes to its summer marketing campaign.

But the AA hopes to return to roadside membership growth by 2020-21.

It saw average income per member increase by about 3% to £162 as more customers took up monthly subscriptions and chose higher levels of service.

The group was also buoyed by a raft of major customer renewals for roadside assistance with the likes of Volkswagen, Lloyds Banking Group, Jaguar Land Rover and Suzuki.

Business contracts account for about 10 million of its 13 million-strong total roadside assistance membership base and saw average income per business customer rise about 5% to £21.

Across its insurance arm, the group’s motor policy book grew by about 16% to 731,000, while it returned the home cover book to growth, up about 1.5% to 830,000.

But average income per motor and home policy fell to £69, reflecting investment in new business growth.