A SECOND successive year of investment losses has nearly wiped out motoring club and insurance group RAC’s annual profit.
A SECOND successive year of investment losses has nearly wiped out motoring club and insurance group RAC’s annual profit.
A tax credit of $1.5 million was just enough to keep RAC in the black, with a net profit of $982,000 for the year to June 30 2003, compared with a profit of $17.7 million in the previous financial year.
Chief executive Terry Agnew said the total investment return in 2003 was 2.18 per cent, with dividend and interest income offsetting a $16.9 million fall in the market value of its investments.
The investment result was even worse in 2002, when RAC posted a return of minus 0.26 per cent.
However it was able to report a healthy profit in 2002 because the $18.2 million fall in the value of its investments was charged against an investment revaluation reserve.
This year the investment loss had to be written off against profits because the reserve had been exhausted.
RAC is not alone in suffering weak investment returns, with many institutions and super funds adversely affected by falling share values.
Mr Agnew said RAC’s investment portfolio was conservatively managed, with a mix of ‘top 50’ Australian shares, international shares and fixed interest securities.
He noted that RAC’s investment return over the past five years (6.09 per cent annualised) had exceeded the benchmark return (5.92 per cent) set by its financial advisers.
As well as suffering from weak investment returns, RAC also wrote down the value of its property assets by $2.8 million.
Mr Agnew said the affected properties were mainly special purpose premises, such as vehicle inspection centres that were no longer used by RAC.
He added that RAC remained in a strong financial position, with net assets of $416 million.
RAC’s operating revenue last financial year was $73.2 million, with the biggest component being membership subscriptions and entrance fees of $30.1 million.
This grew by 6.6 per cent, broadly in line with the growth in membership to 445,000 people (up 25,000).
Staff expenses fell by 3.9 per cent to $41.2 million, while corporate and administration expenses fell by 1.8 per cent to $8.4 million.
The net profit included a $4.2 million contribution ($4.1 million previously) from RAC Insurance, the 50:50 joint venture established by RAC and national insurance company Promina.
Mr Agnew said RAC would continue to pursue new growth opportunities that leveraged its brand strength and large membership.
An example was last year’s relaunch of its ‘mortgage find’ product following the acquisition of a mortgage broking business.
