AA Fires Executive Chairman Mackenzie for ‘Gross Misconduct’By
Shares fall as much as 18%, the most in more than a year
Investor GLG shorting AA with $16.9 million position
The AA Plc removed executive chairman and director Bob Mackenzie from the company with immediate effect for “gross misconduct.” The shares fell the most in a year.
John Leach, who has been with the AA since June 2014 and was named a senior independent director later that year, will replace Mackenzie as chairman, the firm said in a statement on Tuesday. Simon Breakwell, who joined the AA as a non-executive director in 2014, and set up Uber.com’s European operations, has been appointed acting chief executive officer. He is also a venture partner at investment firm Technology Crossover Ventures LP. Mackenzie was fired for a personal conduct matter, a spokesman for the firm said without elaborating.
The company, which provides breakdown cover for motorists and insurance, fell as much as 18.3 percent in London trading after the announcement and was down 14 percent by the end of trading, pushing this year’s decline to 24 percent.
The Times newspaper reported late Tuesday that it received a statement by Mackenzie’s son Peter, who said his father was having an “extremely distressing mental health issue” and that he has been admitted to a hospital.
Bob Mackenzie, 64, led a management buy-in into the firm in 2014 that also included GLG Partners, Invesco Corp. and Henderson Group Plc as part of an initial public offering. GLG is currently shorting the firm with a position valued at $16.9 million, according to data compiled by Bloomberg. A GLG spokeswoman declined to comment. Mackenzie was previously chairman of auto rental business Northgate Plc and CEO at National Car Parks.
‘Erratic Work Load’
AA’s financial performance in the first six months has been negatively impacted by “erratic work load patterns” while the cost base is inherently fixed, AA said in the statement. That was especially true in June and July, when demand rose. The company also incurred a one-time cost relating to a profit-sharing agreement with a third party for certain products including breakdown repair cover.
The firm has also seen significant growth in the number of insurance policies underwritten by its own business on behalf of its broker. That means the revenue is recognized over the life of the policy, impacting profits in the year in which it’s written.
The board had already begun the process of splitting the combined role of executive chairman at the company, according to the statement.
“Any incoming management could well look to address the stretched balance sheet,” Jefferies analyst William Kirkness wrote in a note to clients, adding that AA’s outlook for the year was “based on wide ranging factors, some of which appear one-off in nature while others appear more in line with the normal underlying business.”