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350 Jobs Going At AA

Monday, April 13, 2015

350 Jobs Decline At AA Due To Heavy Debts And Bosses Who Should Seek Help To Stop Reckless Gambling Before Any More Damage Is Done

AA should be investing in advertising, staff training and equipment in its key business areas where investment needs to be undertaken says GMB

GMB, the union for staff at AA motoring organization, commented on jobs currently under threat at AA and jobs recently gone.

There are cuts  in Home Emergency Response from 90 staff down to 65 with a loss of 25 jobs, cuts of 10 staff in windscreen assist as well as an estimated 35 Senior Managers/ HR managers now placed at risk of redundancy. These numbers do not include the recent 300 jobs that went in call centres and back room office staff.  See notes to editors for copy of recent article in FT on AA plans to raise almost £1bn in equity and debt as part of refinancing measures.

Paul Grafton, GMB Regional Organiser, said “GMB expect to see jobs decline by a further 350 at the AA nationally as the debt laden company struggles to keep in front of its competitors whilst suffering from bad planning and from decision makers at the top who do not learn from previous mistakes.

Take tyre fitting as an example. AA purchased AA Tyrefit in 2002 and attempted to turn a profit by also purchasing the Nationwide auto centres from Halfords. In 2004 the AA closed AA Tyrefit and its service centres at the cost of 1,300 jobs. AA now want to re-launch a Tyrefitting service as part of the recent refinancing deal. There is little evidence that there is enough space for growth in this business.

The AA should be investing in advertising, staff training and equipment in its key business areas where investment needs to be undertaken and stop taking ridiculous decisions that could see further job losses in the future.”

Contact:  Paul Grafton, GMB Organiser on 07714 239092 or 0208 397 8881 or GMB press office 07921 289880 or 07974 251 823.

Notes to editors

Report on Financial Times dated March 25, 2015

AA to raise £935m to cut annual interest costs

Andy Sharman, Motor Industry Correspondent

The AA has unveiled plans to raise almost £1bn in equity and debt as part of refinancing measures that will allow the roadside assistance group to cut its annual interest costs.

The Hampshire-based company, which turns 110 this year, listed in June following a management buy-in of the group led by Bob Mackenzie, now executive chairman.

The new leadership team is trying to overhaul the motoring organisation after years of under-investment, while paying down expensive debt inherited from the previous owners.

As part of the refinancing, unveiled on Wednesday, the AA will raise £200m of equity through a placing and open offer and issue £735m in bonds.

The measures were accompanied by strategic changes, including plans to invest in IT systems and the company’s digital services, as well as increase spending on marketing and attracting new members.

The company has about 3.8m personal members, along with 9.6m business customers, equating to about a 40 per cent share of the roadside assistance market. But in terms of overall motoring spending in the UK — including car insurance, servicing and parts — it has just 1.5 per cent of the market.

Mr Mackenzie said the management planned to “revolutionise the business through technology”, moving it from a paper-based roadside insurer sending out 35m letters a year to being a digitally-focused brand.

Up until the summer, the AA was owned by private equity groups Charterhouse, CVC and Permira, who in 2007 merged the motoring organisation with over-50s insurance company Saga in a £6bn deal.

Under a July 2013 refinancing arrangement, the AA was left carrying about £3bn in net debt as part of plans to separate the company from Saga, which is now also separately listed.

£45m

Fall in AA’s £190m annual interest costs as result of refinancing plan

A subsequent refinancing at the AA saw it issue £350m of high-yield payment-in-kind notes, financial instruments that pay a high level of interest or dividends in debt rather than cash.

Half of those notes were paid off in December, using proceeds from the initial public offering, and Wednesday’s refinancing will allow the company to redeem the remainder. It will also refinance £655m of bonds that, like the Pik notes, were paying 9.5 per cent interest, almost double the average interest rate on the company’s borrowings.

As a result of the latest refinancing plan, the AA’s £190m annual interest costs will fall by £45m and it said the moves would allow it to start paying dividends worth “no less than £50m” for the year to the end of January 2016.

The company unveiled the measures alongside preliminary results for the year to the end of January. Revenues were broadly flat at £983.5m, while operating profit fell by about 13 per cent to £326m, which the company blamed on costs related to the IPO and other restructuring measures. Net debt stood at just under £3bn at the end of January, versus £3.2bn a year ago.

“This company can support very high levels of debt,” said Mr Mackenzie.

AA shares fell 1.8 per cent to 419p on Wednesday morning, valuing the company’s equity at £2.3bn. The shares have risen around 80 per cent since the June flotation.

 

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