MCHL Up for sale some Qs answered12 Oct 2011 17:23
Mouchel puts up ‘for sale’ sign after warning
By Gill Plimmer and Anousha Sakoui
Mouchel has admitted it is open to takeover offers after a severe profit warning, despite spurning three bids in the past 12 months, sources close to the motorway and engineering services company have said. “We are open to take over ... the board would consider anything serious,” a source said.
Lenders to the company are set to appoint KPMG as independent advisers as they seek to understand more fully the problems that led Mouchel to downgrade profits by about £8.6m ($13.4m) this week, people with knowledge of the situation said.
On Thursday the shares crashed 30 per cent after the chief executive resigned in the wake of revelations that an actuarial mistake on pensions had led it to overestimate profits on one job by £4.3m, while a review of other contracts led to a £4.3m increase in spending being required.
The development is the latest twist in a saga at Mouchel, which has fought off takeover bids from Costain, Interserve and VT Group [now Babcock] though all three declined to step forward with an offer this week.
“We said before that our focus remains on organic growth and our position remains unchanged,” Tim Haywood, chief executive of Interserve, told the Financial Times.
Analysts suggested potential bidders were likely to hold off until there is more clarity on the numbers or wait for a break-up in which they could cherry-pick the most lucrative road maintenance and payroll contracts for councils.
Discussions are also continuing with its three lenders, Royal Bank of Scotland, Lloyds and Barclays, as it attempts to avoid breaching a covenant over the company’s £87m debt. Mouchel has tough commitments, which include a scheduled repayment of £30m next spring.
Its covenants include a pledge for debt to be not more than 2.44 times the company’s underlying earnings before interest, tax, depreciation and amortisation, which are estimated to come in at £34m.
A downward revision of £8.6m to Mouchel’s bottom line is significant for the business. Last year it made a profit of more than £30m and it was due, before Thursday’s profit warning, to report an already downgraded £14m for this year.
Mouchel’s troubles come amid difficult times for suppliers to the public sector. While the government’s austerity programme has been widely expected to lead to a boom in outsourcing as councils seek to save money, it has also led to a squeeze on margins as contracts are adhered to more stringently.
Mouchel puts up ‘for sale’ sign after warning
By Gill Plimmer and Anousha Sakoui
Mouchel has admitted it is open to takeover offers after a severe profit warning, despite spurning three bids in the past 12 months, sources close to the motorway and engineering services company have said. “We are open to take over ... the
Sign In
Follow the stocks
