Tag Archive | "AA"

UNION ASKS AA TO CONSIDER ‘DEBT FOR EQUITY’ SWAP

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UNION ASKS AA TO CONSIDER ‘DEBT FOR EQUITY’ SWAP


AA faces a tough few years

The GMB union is calling on the directors of the AA to give ‘serious consideration to negotiations’ on converting debts to equity to relieve growing pressures on the day to day operation of the business from having to service the £2.7 billion debt mountain inherited from the private equity previous owners. This follows an announcement by AA on a profits warning and dividend cuts.

On 21st February, the AA announced that profits will be £50m lower than forecast and that it is cutting the dividend from 9.3p per share to 2p. Debts are nearly eight times net free cash flow, an unusually high amount. AA membership figures are also down.

The figures came as AA CEO Simon Breakwell announced a three-year ‘strategic review’ of the business, which included modernising the breakdown service with new IT systems
and connected car technologies, while also increasing the reach of its insurance services.

CAT has seen an all-staff email from Breakwell. In it, he admits that ‘the reality is that many of you are working against the odds’. He mentions the speed of dispatch, stretched patrols and the reliance on third party garaging as reasons why the service has been pushed. He also mentions the legacy IT systems used by the organisation ‘that do not always allow call handlers to access the information they need quickly when dealing with breakdowns’. He adds that these old systems are now being upgraded ‘to allow us to deliver our strategy’.

Paul Grafton, Regional Officer at the GMB union welcomed the sentiments in Breakwell’s email for ‘recognising the pressures staff are facing in the day to day operations of the business’

He added: “Directors need to now face up to and deal with the fundamental cause of the pressures- the £2.7bn debt mountain inherited from the private equity owners.

“When debts are more than two times net cash flows, warning lights flash in any normal business. At AA, the ratio is nearly eight times. It is not sustainable. No amount of hopeful scenarios will make it so. Growing the insurance business, patrols selling more batteries and tyres and in car diagnostics will never fix this”.

“It won’t be easy but AA directors have to give serious consideration to negotiations on converting debts to equity to relieve growing pressures on the day to day operation of the business”.

The news follows a report in last month’s CAT of how the AA announced 100 redundancies and closed a training centre. Despite bad headlines, the AA brand remains strong, topping a poll of the UK’s ‘Most loved brands’ several years running.

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100 REDUNDANCIES PLANNED AS AA RESTRUCTURES

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100 REDUNDANCIES PLANNED AS AA RESTRUCTURES


A hundred management, admin and support roles are to go at the AA, plus the closure of the National Training Centre at Melton Mobray, according to documents seen today by CAT. Roadside patrols will not be affected.

In a memo to staff dated January 10 2018, the AA said: “We are today announcing a series of proposals involving restructuring of management and administration in a number of functions across the AA, with the exception of our frontline delivery teams in roadside operations and contact centres”. The memo added that the proposals are aimed at ‘reorganising and focusing accountability on our emerging strategic priorities’, as well as reducing ‘layers of management’ in order to reduce cost to fund frontline services.

Formed in Edwardian times, the AA has been struggling with the level of debt for years. In 2007 private equity group Acromas bought the company, but sold it in 2014 in a complex ‘accelerated float’ management buy-in, with £1bn of backing from 10 investors. The company was publically listed, but saddled with £2.7bn of debt. Share value dropped in August 2017 following the firing of Chief Executive Bob Mackenzie for gross misconduct.

Paul Grafton, Regional Organiser for the GMB Union said; “The closure of national training centre will reduce structured training and in our view impact on quality of service delivered by the patrol force”.

“All these cuts are a direct result of the unsustainable levels of debt left by the previous private equity owners” he said, adding: “It looks as if the latest activity is to squeeze the last drop out of the business before franchising”.

Figures show that the costs of financing the debts are £185m per annum in the last published accounts. Servicing the debt took up 66 percent of the Operating Profit of £284m for the year ending 31st January 2017.

In addition, the union says that the AA’s pension deficit is £622m, which in pound note terms is nearly double the £345m deficit that brought the demise of BHS.

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THE PARTS ALLIANCE ANNOUNCES AA PARTNERSHIP

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THE PARTS ALLIANCE ANNOUNCES AA PARTNERSHIP


The Parts Alliance has announced a five year partnership with the AA. Terms of the deal have not been disclosed.

The group will now supply batteries, vehicle parts and consumables to one of the UK’s largest vehicle breakdown service firms over the next five years.

Speaking of the partnership,  Sarah Millward, Commercial Director Road Operations at the AA, said: “Both sides have been working diligently to ensure the varied and special requirements of Britain’s largest breakdown organisation can be met”. She continued. “The Parts Alliance has shown it has the footprint and market leading systems to support our needs, while also providing access to a wide ranging supply of quality parts, which is critical in enabling us to maintain our service to our members.”

“The length of this contract with the AA is testament to our partnership to date and is a major business win for our group” said Mike Curry, The Parts Alliance National Accounts Sales Director:  “We are supplying the AA with premium quality brands from stock to provide an all makes parts programme, our market leading catalogue Allicat identifies the correct vehicle fitment required and has the lowest product returns rate within our industry which helps reduce breakdown repair times”.

Peter Sephton, Chief Executive of The Parts Alliance, concluded: “We are delighted to be a business partner and supplier to the AA, one of Britain’s most trusted brands. “As with all our customers, we want to go that extra mile to ensure we deliver the right level of support, quality parts, systems and innovation to meet their needs. Allicat and our PartVend are two examples of how we can do this.

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MOT CHANGE: IS THE TRADE IN AN ECHO CHAMBER?

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MOT CHANGE: IS THE TRADE IN AN ECHO CHAMBER?


Mixed responses for 4-1-1 proposition

A YouGov poll for SMMT indicated that 76 percent of motorists want to keep the interval for vehicles’ first MOT at three years, rather than increasing it to four as proposed by the government.

Mike Hawes, SMMT Chief Executive, said, “The MOT is an essential check on the safety and roadworthiness of vehicles. Extending the first test for cars from three to four years is not what consumers or the industry wants given the serious risk posed to road safety and vehicles’ environmental performance. The latest vehicles are equipped with advanced safety systems but it is still critical that wear and tear items such as tyres and brakes are checked regularly and replaced. We urge government to scrap its plans to change a test system that has played a vital role in making the UK’s roads among the safest in the world.”

However, a story in the Telegraph suggests that the motor industry might be living in its own echo chamber. Under the headline ‘Car industry battles changes that could save drivers £100m a year’, the story mentions the SMMT report and counters it with a similar survey conducted by the AA, which asked the same question but phrased differently. In this survey, only 26 percent wished to keep the current regime, with 44 percent keen to change to four years and the remainder ambivalent. Luke Bodset of the AA press office was quoted as saying: “Cars now have the ability to ‘squawk’ and tell drivers if there is a problem with the tyres or battery as well as more fundamental mechanical maladies” he told the paper.

Neither tyre pressure nor states of battery charge are part of the MOT, but his sentiment seemed to chime with a high number of the readers that responded in the the below-the-line comments. “Ridiculous arguments by the motor servicing industry and a change that is long overdue” wrote reader Richard Bassett. Andrew Blowers concurred, writing: “A healthy dose of self-interest from the motor trade then. Modern cars are so well put together and safe that a four years makes perfect sense!”

Not all readers agreed. “South Africa had roadworthy checks only at change of ownership. I don’t recall any checks during 18 years in Botswana” wrote Charles Guerin. “Makes me appreciate the British MOT. At least I have a statistically reasonable chance that the vehicle coming towards me will be able to avoid me”.

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AUTO WINDSCREENS ACQUIRES AA AUTOWINDSHIELDS

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AUTO WINDSCREENS ACQUIRES AA AUTOWINDSHIELDS


Windscreen replacement costs are up 68% in ten years

Automotive glass company Auto Windscreens has announced its acquisition of AA AutoWindshields, the AA’s automotive glazing business, for an undisclosed sum.

The deal will see AA AutoWindshields’ Preston offices and its 200 staff and technicians integrated with Auto Windscreens and, under a ten year partnership arrangement, the AA will continue to use Auto Windscreens to deliver glass services for AA members; its business-to-business and insurance customers.

Chris Thornton, Managing Director of Auto Windscreens commented: “This marks the beginning of a new and exciting chapter for Auto Windscreens and further reinforces our position as a leader in the industry.”

Auto Windscreens has had a turbulent recent past. Following a sale in 1998 by the-then parent company Heywood Williams, it passed through a number of hands over the next decade including HSBC Private Equity, Arques Industries and RAC plc. However it went into administration in 2011 while in the hands of Moguntia Invest. A deal with Markerstudy Insurance-owned investment group Trifords established a newco under the same name, albeit without the OE glass production facility of the original company.

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