The AA’s opting for the long road to stability
Shares in the AA have been swerving all over the place since it returned to the stock market in 2014.
After jumping from a float price of 250p to 430p the following year, the ambitions of the team that steered the roadside rescue outfit through an unusual management-buyout-cum-IPO began to stutter.
The stock slid and slid until, in the summer of 2017, it emerged that executive chairman Bob Mackenzie had assaulted colleague Mike Lloyd following a row (in a pub, naturally) about the AA’s strategy. Mackenzie was given the boot and the stock nosedived.
Last January, it was printing around 75p as investors remained unconvinced. In fairness to the company’s current management team, things appear back on track.
Read more: Breakdown group AA blames investments for profit slump
Yesterday’s results were reassuringly dull, a 20mph suburban weekend trip to Tesco in a Toyota Yaris. Ebitda came in virtually bang on the money at £341m, while revenue edged closer to the £1bn mark. While profit was significantly down, the City seemed happy with the investments the firm is making.
The core roadside service is being bulked up as one would expect, alongside long-overdue improvements to the AA’s tech offering, including a so-called Smart Breakdown device that figures out why your car has ground to a halt.
It also delivered welcome news on existing contracts, with Lloyds and Volkswagen, as well as a new deal with insurance giant Admiral.
The AA desperately needs to appeal to younger drivers, a move dependent on a series of useful and popular tech developments combined with a stronger insurance arm. For a generation with entirely different lifestyles and habits to the boomers, the AA must appear simple, efficient and ubiquitous.
Read more: AA wins multi-million-pound contract to service VW cars
The stock remains prone to volatility. Even yesterday, it was up five per cent early on before paring gains and closing a mere 0.7 per cent higher.
It remains down compared to six months ago, but is still sharply up year-on-year. Investors would be forgiven for feeling car-sick.
However, a reasonable number have faith in the company. Buy recommendations are becoming notable, and yesterday’s figures suggest that chief exec Simon Breakwell, originally brought in to steady the wheel, could be the man to deliver a smoother journey ahead.