AA & Saga are owned by the same group Acromas - the losses reflect addditional costs since they were taken over with large amounts of borrowed cash.
Maybe this is why the AA are trying to get some £200/ yr for their top of the range cover that can be had for 1/3 of this from others in the breakdown market.
The AA can provide the cover for £60 if you have a Toyota and buy it throught Toyota.
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the losses have nothing to do with additional costs, but the fact that the AA were bought out by venture capitalists TWICE, not by fresh capital, but by saddling the company with the debt used to purchase it.
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Its just like the Glazers did with Manchester United. It shouldn't be legal really.
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SWMBO worked for Centrica when they took the decision to sell the AA to a private equity firm in 2004, in order to better focus on their core energy business. In fact, she was in the stages of applying for a job within the AA when it all happened, and had a lucky escape as it turned out in the following months.
Despite the company having flourished under Centrica's ownership (>50% growth in membership in four years, and a £93m profit in the previous fiscal), 10% of the workforce were immediately made redundant by the new board, with the axe hanging over many more. She saw some of the most experienced and skilled people she'd ever worked with forced to leave the business under the most unpleasant of circumstances.
Fast forward six years, and this once successful firm is now a loss making basket case. Her reaction when she read this news? "I'm not surprised in the slightest".
Last edited by: DP on Mon 16 Aug 10 at 11:28
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"...this once successful firm is now a loss making basket case."
Er, not quite. It made an operating profit of £183.5 million. So the day to day operation is profitable and maybe getting rid of 10% of the deadwood was the right decision. The problem is the the enormous interest payment of £700+ million to cover the loan to acquire the business in the first place.
As Rattle said - it shouldn't be allowed, as ultimately the greed of the highly leveraged buyers may eventually sink the company.
Last edited by: Dulwich Estate on Mon 16 Aug 10 at 11:45
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The losses are solely due to the interest rate charged on the laons on the Balance Sheet used to buy the Companny. 16.5% I believe...
Saga have just quoted me for Mrs' car insurance.. 40% lower than last year. They must be doing something right...
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>> AA & Saga are owned by the same group Acromas - the losses reflect addditional
>> costs since they were taken over with large amounts of borrowed cash.
>>
A different picture can be painted:
"chief executive Andrew Goodsell said the company traded strongly in its second full year of trading since the merger of AA and Saga into one organisation.
Turnover increased 2.3 per cent to £1.65 billion after a strong performance from Saga, the specialist insurance and travel group that serves the over 50s.
Growth in financial services meant Saga contributed sales of £793m, up nearly 6 per cent, while AA sales were down slightly at £855.1m. Gross profits excluding one-off items were flat at £882m.
Mr Goodsell said the "robust" performance was achieved despite difficult economic conditions and specific issues such as the "dramatic" rise in personal injury claims costs in the motor insurance market and the worst winter weather experienced by its roadside patrols in 30 years."
By my calculations, sales of £793m at Saga plus £855.1m at AA giving gross profits of £822m means that they have a very healthy 50% gross profit margin.
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>> What about net?
>>
Operating Profit was £578.2 million.
Chief Financial Officer’s Report
The Group turnover is £1,648.4 million, which is 2.3% (excluding
exceptional items) more than that achieved last year. The AA
contributed £855.1 million, of which £623.4 million was from its
roadside assistance business and £178.2 million was from insurance.
Saga contributed £793.3 million of which £523.0 million was from its
insurance business and £257.4 million was from its travel business.
Group gross margin (excluding amortisation of goodwill and exceptional
items) was 53.5% of turnover. Of the £882.0 million gross profit, only
42.3% was spent on administrative and marketing expenses (2009:
47.1%) and the Group generated an Adjusted EBITDA of £578.2 million
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AA (+lose £529m in last FY - Zero
