'Pothole epidemic' and cold winter hits AA profits

Bad road conditions and extreme weather in the UK have contributed to a drop in profits at the AA.

The motorists' organisation - which has increased investment into its services - saw its pre-tax profit decline 65% to £28m for the first six months of 2018.

AA boss Simon Breakwell said the severe winter caused a "pothole epidemic", which led to breakdown callouts hitting a 15-year high.

Shares in the company fell more than 12% in London on the news.

The firm had previously warned that drivers and insurers were losing £1m a month repairing damage caused by potholes.

AA shares fell sharply in February, after it warned that its full-year profit would fall short of analysts' expectations.

Despite the fall in half-year profits, AA said it was still on track to deliver on the renewed guidance.

• Pothole 'epidemic' costs £1m a month, says AA

• AA shares plunge 28% on profit warning

An unusually high number of breakdowns this year has driven up costs for AA.

The number of breakdowns between January and July increased by 8% to 1.9m and to meet demand, the company had to call on third-party patrols.

However AA benefited from an increase in roadside sales of products and services to help drivers deal with the cold weather.

Overall revenue at AA grew a modest 2%, to £480m.

The company, which says it has a "traditional 50-year plus core demographic" has struggled to attract younger customers, who either do not own cars or are unwilling to pay for roadside assistance.

In an attempt to remedy this, the AA has invested in an app and its Car Genie digital device, which is installed in members' cars and can alert the driver to potential motor problems before a breakdown occurs.

The hope is that such digital products will appeal to younger customers.

Embracing the potential of new technologies could help return AA to growth, according to Andrew Nussey, an analyst at Peel Hunt.

He says the company is in the early stages of a transformation, which will see AA using data to offer customers improved service.

But Mr Nussey cautioned that such systems take time to implement.