RAC posts big profit lift

The Royal Automobile Club of WA has reported strong growth in revenue from its insurance and resorts businesses, with the group also benefiting from large investment gains.

Its net profit increased to $79.3 million for the year to June 2021, up from $27.1 million in the prior year.

This was helped by a $32.1 million ‘fair value’ gain on its investment portfolio, mainly reflecting the strong recovery in share markets.

Conversely it had a $14 million write-down in the value of its investment portfolio last year.

The strong recovery in investment markets also flowed through in the form of higher dividends, which were up 57 per cent to $22.3 million.

RAC, which is a member-owned for-purpose company, also disclosed a healthy 15 per cent lift in revenue to $1.07 billion.

Its largest source of income is motoring and home insurance premiums, which were up 14 per cent to $720 million.

This was offset by a 17 per cent increase in claims expense to $514 million.

COVID travel restrictions had a major impact on RAC’s business operations.

Its tourism business achieved a whopping 81 per cent lift in revenue to $45.6 million, reflecting keen demand for accommodation at its parks and resorts.

RAC noted that it took on extra staff to cope with the higher demand, with the group employing in excess of 1,800 people.

But on the flipside, its travel business is struggling, with sales commissions halving to $4.2 million.

Another negative for the group was Enrich Health Group, its aged and home care services joint venture with Quadrant Private Equity.

RAC booked an $11.7 million expense, reflecting its share of an impairment loss recognised in the Enrich joint venture.

This followed a similar impairment in the 2019 financial year.

While Enrich is a provider of community care services, RAC also owns the St Ives retirement villages.

After making substantial writedowns in the value of the St Ives business in FY19 and FY20, it appears to have turned the corner with a 41 per cent lift in revenue to $12.3 million.

This was in the form of deferred management fees and stemmed from a high number of purchases (settlements) in its retirement villages.

RAC’s membership increased by 6.5 per cent to 1,191,350 people.

This contributed to an 8 per cent lift in membership subscriptions to $91 million.