The AA has been blasted by representatives for its former boss for a "cavalier attitude towards shareholders", as it faces a legal claim that could wipe out three-quarters of the firm’s annual profits.
In its full-year results announcement today, the AA said while it had set aside £1m to fund its courtroom battle, it had not made provisions for £225m in damages sought by ex-chairman Bob MacKenzie.
Investors were shocked last summer as MacKenzie was sacked amid allegations of a physical altercation with a colleague. The former board chief has mounted a legal challenge against his dismissal, which AA said at the time was on “gross misconduct” grounds.
"The AA’s treatment of Bob has been disgraceful and it would seem they have the same cavalier attitude towards shareholders," a spokesperson for MacKenzie's family told City A.M..
"The family’s lawyers – Rosenblatt – have advised that our claim is robust and we will pursue it with vigour."
The AA declined to comment on the spokesperson's remarks.
Earlier today, AA boss Simon Breakwell said: "We are at law with the previous executive chairman.
We haven’t made any allowance for the quantum of shares that he is requesting because we believe the case is without merit.
AA shares were London’s biggest gainer today, rising almost seven per cent. They crashed to an all-time low in February after the firm cancelled its dividend and revealed a turnaround plan perceived by City analysts to be capital intensive.
Full-year earnings were £391m, within previous guidance, with operating profit of £307m.
Clearly a big number
Both Breakwell and finance chief Martin Clarke hailed the S&P decision and what this meant for what Clarke called “clearly a big number in terms of debt”.
“[We will] continue to look at refinancing opportunities,” Clarke said, though this would not reduce the cost of its debt pile, rather with a view to extending its maturity.
Meanwhile, Breakwell denied the spat with MacKenzie was overshadowing the board’s attempt to right-size the AA’s fortunes.
He added: “In the two months since we set this [the restructuring plan] out, we are if anything, more confident.”
The AA will announce a new non-executive director in the coming weeks as it beefs up its board and pivots away from its pre-2014 existence as a private equity-backed firm.
Jefferies analyst Will Kirkness said the annual results were "understandably in-line".
While forecasts for the next 12 months "look well ground", he added: "We continue to see earnings risk from 2020 as we remain sceptical that initiatives can deliver the five to eight per cent group earnings growth.
In addition, even returning to 'normalised' free cash flow of £100m per annum, the debt burden of £2.6bn is unsustainable.