Shares in AA plc (LON:AA.) revved 5% higher on Tuesday after the roadside recovery specialist finally halted the decline in its membership.
The number of AA members has been dwindling for the past eight years, but it added another 4,000 paid personal members in 2016 to take the overall number to 3,335,000 and reverse the long-standing decline.
It’s been on a mission in recent years to slash costs and invest in technology to make it more appealing to younger customers, a strategy which appears to be working.
The firm said its digital offering – such as its smartphone app and online sales channel – was “revolutionising” the customer experience and helping to bring new members on board.
That helped AA – which returned to the London market in 2014 following years of private ownership – post a pre-tax profit of £100mln, compared to just £9mln in 2015.
Revenues for the year to 31 January 2017 also increased to £940mln.
Much like its membership base, the number of motor insurance policies had been on the wane since 2008, but they also edged higher last year.
"The transformation is delivering growth in our Roadside Assistance Membership base and of motor insurance policies, reversing long-term historic declines. It has given us a firm platform for sustainable growth,” said executive chairman Bob Mackenzie.
“We are now capable of building on our technologies, brand and positioning in our markets to take advantage of the abundant opportunities that arise from our ability to fulfil a wider set of consumer and business needs.”
As a result of the improved performance, AA has upped its dividend by a little more than 3% to 9.3p (2015: 9p).
The outlook for the current financial year is also good, the firm said, after a “positive” start.
It will also launch its new Car Genie product over the summer and AA reckons this latest ‘connected car technology’ can pre-empt up to one-third of breakdowns.
Not a totally smooth ride
The company’s debt has always been an area of concern for investors and AA itself.
As of 31 January 2017, the debt pile stood at £2.7bn compared to the firm’s current market capitalisation of just £1.6bn.
It has been working to address this issue though and sold off its Irish business last year. Of the £130mln raised from the sale, £106mln went towards paying down some of its debt.
Shares were up 5% to 270p midway through the morning session on Tuesday.