StockMarketWire.com - AA reported its annual profits more than halved as costs to steady performance in its roadside and Insurance businesses weighed on margins. The company also said it had signed a contract with Admiral.

For the year ended 31 January, profit before tax fell 62% to £53m and revenue gained 2% to £979m.

In line with its guidance, group trading earnings (EBITDA) declined by 13% to £341m for the year. Trading EBITDA margin fell to 35% from 41% a year earlier

The fall in earnings was blamed on the £26m investment in Roadside and Insurance as well as the increase in amortisation and depreciation due to the investment in IT transformation and growth capital expenditure.

In insurance, motor policies grew 16% at 731,000, and its house insurance policy book returned to growth, rising 1.5% to about 830,000.

New AA breakdown paying members declined by 2% to 3.21m with retention just over 80%. While average income per paid member rose to about £162, up 3% from a year earlier.

The company proposed a final dividend of 1.4p per share.

In a separate statement, the company also said it had signed a new 3-year contract with Admiral through which it would offer AA Roadside Assistance to Admiral's 4.3m UK motor insurance customers across a stable of brands.

The company maintained its medium-term target of delivering a CAGR in Group Trading EBITDA of between 5% to 8% by 2023 from the 2019 base.

The company said it would target about £80m in free cash flow to equity in 2020, in line with previous guidance.

'The results we are announcing today are in line with our previous Trading EBITDA guidance and reflect our investment in the business which puts service, innovation and data at the heart of the AA,' said Simon Breakwell, CEO.

'Our new contracts with Lloyds Banking Group, Jaguar Land Rover, Volkswagen Group, Arval and others firmly position the AA as the B2B partner of choice for Roadside.'

'Looking ahead, we are confident that our strategic plan will deliver sustainable EBITDA growth and strong free cash flow generation that will enable us to delever and return long term value for our shareholders.'

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