AA's share price tumbled this morning after the car group revealed a £63.6m loss following its refinancing.
The so-called fourth emergency service, which in March raised £935m to cut down its debt mountain, has had a difficult first half, with revenues down 1.4 per cent to £484.6m in the six months to the end of July, compared with £491.7m for the same period last year.
Its loss followed a £10.2m profit over the same period last year.
Adjusted earnings per share were 8.2p for the six month period, against 11.6p for the same period last year and 23.3p for the year at the end of January.
Earnings before interest, tax, depreciation and amortisation fell 5.9 per cent to £199.2m.
As a result, AA's share price was down 6.7 per cent in early trading.
Why it’s interesting
The roadside assistance company was left with £3bn of debt following its separation with Saga in 2013, and announced refinancing plans in March to raise £935m to pay off debts and interest payments through a placing and a bond issue.
Costs climbed to £202.2m as a result, of which £87.4m were exceptional, the company said.
The refinancing completed on 31 July 2015, lowering annual cash interest costs by £45m and allowing the firm to pay dividends this year. AA proposes total dividends of approximately £55m or 9p per share for the full year and will declare an interim dividend of 3.5p per share.
AA is upbeat, but it warned on two potential bumps in the road.
Firstly the government's recent and "unexpected" decision to increase insurance premium tax by 58 per cent from November "is likely to create additional churn in both insurance and roadside assistance", the group said.
"Secondly, EU legislation on holiday pay may increase operating costs.”
Read more: AA to stand against IPT premium rise
What AA said
Executive chairman Bob Mackenzie said:
On IPO we set ourselves three objectives: to turn the AA into the UK's pre-eminent motoring services organisation, to revolutionise customer experience through investing and embracing new technology and, finally, to reduce group borrowing and the associated interest cost.
I am pleased to report early and positive signs that our strategy will deliver our expectations of the AA brand.
The AA has once again demonstrated its fundamental strength, stability and hugely cash generative characteristics. We are confident that we are in line with expectations for the full year and that we will position the AA as the digital brand for all motorists' needs."
Investors will need some more convincing that AA's confidence is warranted after a half year loss and changes to legislation which could put the brakes on any turnaround.