Mouchel counts cost of fighting off bids

By This Is Money
Updated:

 

Shares in outsourcing specialist Mouchel Group plunged 12% after the firm admitted the distraction of two bid approaches had hit its order book.

Mouchel whose operations include road maintenance

Gloom: Squeeze on public spending hits outsourcer Mouchel

The firm, which fought off takeover attempts from Costain and Interserve earlier this year, said orders stood at £1.5bn at the end of May compared with £1.9bn at the same time last year.

Its shares were down 8p at 60.5p following the update, which also cautioned that contracts Mouchel has negotiated recently involved higher costs and lower profits as the squeeze on public spending continues.

Looking ahead, Mouchel said trading generally remained very challenging with little prospect of any improvement in conditions in the short term.

The company added that its management consulting arm was still suffering from poor visibility in a depressed market, while local authority contracts and technology work with the Highways Agency 'have all been adversely impacted by the significant spending cuts, especially in discretionary and capital works programmes'.

Its order book includes a £57m contract for the National Traffic Information Service (NTIS), a joint venture with Thales UK to help the Highways Agency make the best use of the existing strategic road network.

Net bank borrowings at the end of May were £109m, compared with £97m at the half year, within the terms of a £170m overdraft that runs until 2014.

Mouchel also announced that Rod Harris would succeed David Tilston as finance director.

Mr Harris, a former finance director at Carillion Business Services, will be promoted from the post of financial controller at Mouchel.

View from the City

Broker Panmure Gordon said Mouchel's trading update was mixed, with discretionary local authority work, around two thirds of group exposure, under pressure although maintenance and regulated activities were holding up well.

It expects profits this year to July to reach £18m and to rise to £20.2m the following year.

Investment bank Espirito Santo said the change in finance director was surprising as Mouchel continues to navigate challenging conditions,

But it added: 'We have spoken to the departing and incoming finance director today, as well as the chief executive and the circumstances of the change appear amicable.'

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