Motoring services group RAC has announced a renewed push into the car insurance market after reporting a two per cent rise in annual profits.
The 108-year-old company, founded as the Automobile Club of Great Britain, said membership of its roadside recovery scheme had remained flat and sales at its windscreen replacement arm were down two per cent.
However chief executive Andy Harrison said the group was managing to turn around sluggish units, and would be spending £5 million in 2005 marketing financial services such as car insurance and legal cover to its members.
"The new financial year has started well and I remain confident in our future prospects," he said.
Revenue growth form continuing operations was up eight per cent to £1.509 billion with total revenues increasing by one per cent to £1.539 billion - reflecting the disposal of RAC's mechanical handling business, the group said.
Group profit before goodwill amortisation, exceptional items and tax was £88.6 million, compared to £86.7 million in 2003. Net debt fell by £ 14.5 million to £139.8 million
However analysts expressed concern over the flat membership figures, which Mr Harrison had said were caused by problems at the company's call centres which had knocked renewal rates by three per cent to 80 per cent across 2004.
Investec analyst Guy Hewett said: "We believe membership numbers are a key issue for the group, with the strategy reliant on growing the membership base and cross-selling more products."
Mr Harrison said membership had started to grow again in the last quarter. "I see no reason why we can't get back to the growth trend we had before - four per cent per annum," he said.
RAC, previously known as Lex Service, changed its name in 2003 to take advantage of the RAC brand, following its 1999 purchase of roadside assistance firm RAC Motoring.
The former car retailer has spent the last few years transforming itself into a support services firm for industry, public bodies and motorists.
The group said it was keen to continue building on its financial services, having bought out insurer AXA in a £31 million deal earlier this year. This will help increase the group's insurance book to approximately 450,000 policyholders by the end of 2005, the company said.
RAC's driving school BSM saw revenues up by ten per cent to £34.9 million and announced that it had welcomed its 3000th instructor during June 2004. However, sales at the group's windscreen repair unit were down two per cent to £95.2 million.
The firms business services, including Lex Vehicle Leasing, RAC Business Solutions and Manufacturing Support Services, saw profits up three per cent to £54.7 million. RAC Business Solutions saw profit grow by 271 per cent.
The proposed final dividend of 15.6p per share will bring the total dividend for the year to 25.8p, up from 24.3p.