AA Group says legal battle with former boss Bob Mackenzie will cost it £1m

Former boss sacked over physical altercation with director is suing company for £225m in damages

The AA said bad weather hit earnings last year (REUTERS)

The AA revealed on Tuesday that it expects its legal battle with former executive chairman Bob Mackenzie to cost it up to £1m.

Mr Mackenzie was sacked last August, with the company citing “gross misconduct” as the reason for his dismissal. It later emerged he had been in a physical altercation with Michael Lloyd, the head of AA’s insurance division, at a hotel bar in July 2017.

The former chairman has filed a claim with the high court seeking an injunction to retain his management value participation shares and up to £225m in damages from the company.

AA said it “has not made a provision for these amounts as the group expects to be successful in rigorously defending these claims.

“However, the group will incur legal costs of approximately £1m to defend these claims during the next two financial years which it would seek to recover from Bob Mackenzie when the litigation concludes,” the company added.

The group revealed the estimated legal bill in its full year results on Tuesday, in which it reported a 2 per cent rise in trading revenue, to £959m, and an 8 per cent increase in operating profit, from £284m to £307m.

Trading Ebitda (earnings before interest, taxation, depreciation and amortisation) dropped 3 per cent to £391m, which the firm blamed partly on the recent bad weather, which led to a greater number of breakdowns.

However, investors were pleased with the company’s report, with shares rising by as much as 6 per cent on Tuesday.

AA’s chief executive, Simon Breakwell, said: “The AA has delivered a solid performance, in line with guidance, despite the difficult weather conditions.

“We have made a positive start to the 2019 financial year as we begin to execute on our new strategy to put service, innovation and data at the heart of the AA with additional investments to grow roadside and to accelerate the growth of insurance.

"We remain confident our financial requirements are well funded and will continue to seek ways of lowering the cost of borrowings and de-lever over time."