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28th August 2008

PFD sues United agents for £853,000

24.06.08 Alison Flood

PFD is suing its former directors over payments totalling £853,000, former parent company CSS Stellar has confirmed. The figure was included in a financial statement put out by CSS, which showed that it wrote off £6m from the value of the company following the departure of a number of its agents.

According to the statement the review into monies paid by PFD from 2005 to 2007 to "certain of its employees", concluded that "payments totalling £853,000 had been made to directors and employees of PFD during these years without evidence of authorisation". PFD's new chairman Andrew Neil told the Independent at the weekend that he was looking for "£750,000".

PFD is in the early stages of litigation against its former employees, many of whom have formed rival agency United Agents, in respect of the payments "and related matters". It anticipates "prolonged" litigation, and has therefore taken in its results for 2007 a provision of over £500,000 to cover potential legal costs, CSS said.

CSS confirmed that following the sale of the business to Neil and two as-yet-unnamed City financiers, the risks and rewards from the litigation would reside with PFD

CSS' financial results also showed that it made an £8m loss in 2007 after writing £6m off the value of PFD. Despite the problems PFD produced revenue of £9.5m in 2007, an increase of 2% on 2006. Operating profit of £0.4m was however 47% lower than the prior year.

CSS chairman David Buchler, who also announced his retirement, said he would have "welcomed" a dialogue with the PFD directors and senior agents before they left to set up United Agents. "While I would have welcomed a genuine dialogue with the former PFD directors and agents there appeared no appetite on their behalf to enter into such a dialogue," he said. "They had long since decided that a management buy out on terms dictated by them was the only way forward. The same people that were dictating terms to CSS received the sum of £12.9m some years earlier for the purchase of their business."

Buchler said that CSS decided there were "no real links" between the activities of PFD and the rest of the company, and so made moves to effect a disposal of the agency. CSS said it received "a number of offers" for the company, which it sold for £3.75m cash, with another £250,000 due in 2011 dependent on performance.

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