AA profits slide 65pc due to “pothole epidemic”

The AA (LON: AA) has blamed the weather for a 65 percent fall in pre-tax profits.

The roadside vehicle recovery firm low road maintenance spending and a “pothole epidemic” contributed to the highest number of roadside callouts in 15 years.

“We’ve had a 15-year high in breakdowns, we had the worst winter back to back with the hottest summer; all of which causes everyone to drive their cars – and more cars on the road generally means more breakdowns,” said Simon Breakwell, the AA chief executive.

“Sometimes you have a rubbish winter and sometimes you have a really hot summer but it’s rare that you have a rubbish winter back to back with the hottest summer,” he added.

Profits in the first six months of 2018 fell from £80 million in the same period last year to just £28 million.

Shares in the group fell 12 percent of their value by lunchtime trading on Wednesday.

“The first half of FY19 (full year 2019) has seen exceptional weather conditions, from extreme cold and snow in February and March to the hottest summer in recent memory, with the severe winter also creating a pothole ‘epidemic’ on the UK’s roads,” said Breakwell.

“All this led to a 15-year-high in the number of breakdowns we serviced. Against this backdrop, I am extremely proud of our achievements and to be reporting results in line with our guidance as we continue to build resilience throughout the business.”

“We are making good operational progress across our Roadside and Insurance businesses and firmly believe that we have the people and strategy in place to unlock the full potential of the AA and crystallise long term value for our shareholders.”

“We remain on-track to meet our Trading EBITDA (earnings before interest, tax, depreciation and amortisation) guidance for FY19 and to return to growth thereafter,” he added.

Revenue for the group increased by two percent, which is in line with expectations but operating profit fell 35 percent to £116 million.

AA warned in back in February of this year that its full-year expectations would fall short of expectations, causing shares to drop sharply.

The firm has been investing in an app and its Car Genie digital device in order to appeal to a younger demographic.