AA extends takeover deadline, interim revenues stall

The AA has extended a deadline for takeover talks, the breakdown and insurance specialist confirmed on Tuesday, as it reiterated full-year guidance despite a slide in interim revenues and profits.

AA said discussions with private equity firms TowerBrook Capital and Warburg Pincus International were continuing “positively” following an initial approach, made on 24 September, and that due-diligence was ongoing.

It has therefore extended the deadline for the consortium to make a firm offer or walk away by a month, to 5pm on 27 October.

The update came as the heavily-indebted, 115-year old business published interim numbers for the six months to July. They showed a 2.6% fall in revenues to £478m, while pre-tax profits slid 38.1% to £26m. Debt eased only marginally, to £2.6bn.

However, chief executive Simon Breakwell said the first-half performance had been “remarkably strong” and reflected swift actions taken to mitigate the impact of Covid-19.

He continued: “As we look ahead, despite the continued uncertainty and challenges of Covid-19, we are reiterating our full-year guidance of delivering a robust performance in the year ending 31 January 2021, only slightly below that of the prior year, demonstrating our confidence in our resilient and flexible business model.”

In the insurance business, motor policies grew by 11.2%, to 966,000, and home policies by 0.9%. The average income per policy fell 7.2%, however, to £77, reflecting lower commissions and a reduction in administration and processing fees, introduced to help customers during the pandemic.

The roadside assistance business saw membership dip 2% to 3,150K, after the lockdown reduced demand.

The company said debt reduction remained its “key priority” ahead of upcoming maturity dates in 2022, and the board was continuing to review “a range of potential refinancing options, including the possibility of raising new equity”.