St Ives buy boosts RAC bottom line

The RAC’s decision to take full ownership of retirement property business St Ives Group has boosted its annual revenue by more than $31 million and helped it end the year in the black.

The motoring, travel and financial services operator paid $50 million to acquire the remaining 50.1 per cent of St Ives it didn’t own in December last year.

According to RAC of WA Holdings’ annual report, the contributed revenues from St Ives amounted to $31.3 million with net profit of $981,000 in the seven months following the acquisition.

That helped boost its overall revenue to $560 million for the year ending June 30 2013 (up 11 per cent) and make a profit of $32.5 million.

Impairments worth $20 million resulted in the RAC making a $13 million loss for the 2011-12 financial year.

The organisation’s total assets grew to $1.3 billion to $1.5 billion.

The St Ives contribution added to $925,000 profit from RAC’s 49.9 per cent equity stake in the five months before the deal was struck.

If the RAC had had full ownership for the entire financial year, the St Ives Group would have contributed $56.5 million revenue to the RAC’s income.

Taking total control was described by RAC as an opportunity to invest in a growing sector of the WA economy outside its core revenue streams of membership subscriptions, services and insurance.

Insurance was also a big winner for the RAC with income from premiums jumping 10 per cent to $329 million - the organisation’s largest source of revenue.

It said the increase was purely due to policy growth over home and motor insurance - unlike its membership revenue growth, which also benefitted from a premium increase.

Membership subscriptions and fees accounted for $62 million while revenue from services (such as auto servicing) brought in revenue of $43 million.