The AA’s chief executive Jakob Pfaudler says that its financial health is improving, even though its annual profits before taxes tumbling 41 percent to £42million.

Even though the driving school to roadside assistance to insurance group saw its revenues for the 12 months to the end of January rise 11 percent to £1.3billion, its profits still dropped due to higher costs, notably the higher interest charges on its £2.2billion debt mountain.

Last year, the AA refinanced £550million of bonds or interest paying IOUs and repaid £61million of its debt. However, the interest it paid on debts rose by £27million to £153million. The group’s operating costs climbed 15.4 percent to £653million, which included a £2million one-off cost-of-living payment to its staff.

Despite the drop in its profits, Pfaudler said that the AA had put in “strong financial results”.

He noted that the AA’s leverage ratio, which measures a company’s ability to handle its debts, fell from its debts being 5.4 times higher than its profits to 5.1x. Additionally, he highlighted its higher revenues and the fact its membership rose by 400,000 to 14.3million members and business customers.

“FY23/24 has been a milestone year for the group, with strong financial results,” Pfaudler said. “This has been achieved despite considerable external headwinds.”