Week ahead: AA motoring towards ‘solid’ set of half-year results, while Irn-Bru ‘effervescent’

The Automobile Association (AA) will be revealing its half-year results this week.

The Automobile Association (AA) will be revealing its half-year results this week. - Credit: PA

The first set of results from the AA since its summer flotation will be the main highlight for investors during a quiet week for company updates.

The AA is expected to produce a solid set of half-year results tomorrow, the first since its June flotation valued the business at £1.4billion.

The motoring organisation, which has four million members, is now run by a management buy-in team led by former Green Flag boss Bob Mackenzie and backed by institutional investors including Aviva and Legal & General.

It is expected to produce healthy operating profits, although its pre-tax profit will be hit by charges relating to its management buy-in and flotation.

The AA and over 50s insurer Saga were combined in a £6.2bn deal at the height of the credit boom in 2007 to form Acromas, owned by private equity firms CVC, Permira, and Charterhouse.

Saga was sold separately in May in a £2.1bn flotation.

Now that the AA has parted from Saga, brokers want to see it exploit its potentially lucrative membership base.

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Cenkos analyst Sandy Chen said: “We believe there is a significant revenue growth opportunity for the AA in cross-selling insurance products to its roadside assistance customers.”

“We think that when the AA was in the Acromas Group, this opportunity probably would not have been available to it, because its partner Saga would have laid claim to most of the insurance-related business.”

Mr Chen adds that because AA members tend to have lower insurance claims, the firm’s management will be able to negotiate better rates from underwriters.

The AA’s makes around 70% of its sales from roadside assistance, with the rest coming from insurance, a driving school and an Irish roadside business. It has around a 40% share of the UK breakdown and recovery market.

The City will look for signs of how the AA plans to grow now that it is a stand alone business again.

Cenkos forecasts the firm’s bottom line full-year pre-tax profit will fall 58% to £82million, hit by complex one-off debt financing, management buy-in and flotation charges.

Irn-Bru maker AG Barr looks set to unveil another effervescent set of figures when it reports its first-half results on Tuesday.

The Cumbernauld-based firm said in July it expects its sales will have risen 5.6% over the period to £135m, and analysts at Oriel forecast its earnings will come in at £18.2m.

The company, which also makes Tizer and Rubicon, said sales continued to grow despite strong comparatives last year and intense promotional price competition in the market.

It said it had been helped by the weather at the beginning of the summer, with brokers expecting a benefit from its sponsorship of the Glasgow Commonwealth Games.

AG Barr points out that its growth of over 5% through market share gains during the half year is well ahead of the industry average, which research group Nielsen measured as growth of 1.6% against a 0.3% fall in volumes.

The drinks maker said in May it will invest a further £4m at its new plant in Milton Keynes, while confirming it intends to close its Tredegar carton-making factory in Wales with the loss of 67 jobs.

Oriel analyst Chris Wickham said: “Geographic expansion remains central to the growth outlook and for the investment case for AG Barr.”

Brokers also seem to agree that Barr has put last year’s abandoned £1.4bn merger with rival Robinsons maker Britvic behind it.

Menswear specialist Moss Bros may have been hit by a slowdown in summer weddings due to the World Cup, but is still expected to continue its recovery when it posts its half year figures on Monday.

The London-based retailer, which has 135 stores, is expected to post lower suit hire sales because couples put off weddings to avoid clashing with the tournament.

But increased sales following store refurbishments and higher online revenues are expected to lift half-year results.

Moss Bros has staged a recovery in recent years, with chief executive Brian Brick revamping ranges and stores since taking over in 2009, after the group had made a series of losses.

Brokers at Peel Hunt said: “Within the most recent trading update, wedding bookings remain down year-on-year, following a subdued 2013 wedding season.”

“This may, in part, be exacerbated by the World Cup in June, often avoided by marrying couples leading to a wedding season that then stretches later into September.”

At its last trading update in May Moss Bros said hire sales of morning suits were down on 12 months ago.

But the retailer also points out that hire sales only account for 16% of overall revenues.

Moss Bros added it had accelerated its store refit programme and has now completed 45 outlets, which on average have sales that are 8% to 10% higher than older outlets.

It is also phasing out its own label brands such as Ventuno and Blazer, only keeping its two strongest labels - Moss and Savoy Taylors Guild.

Its online business continues to jump ahead and by May it had grown 115% compared to last year. Online revenues accounted for 6.5% of the group, almost doubling from 12 months ago.

Brokers expect full-year pre-tax profits to rise 12.5% to £4.5m.

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