There’s no hiding from it, Mouchel’s full year results were, as expected, pretty terrible. Revenue for the year ended 31 July fell 13% to £551.4m, and pre-tax losses more than trebled to £64.8m. The underlying operating profit (before amortisation) fell 62% to £15.7m – and as a result its underlying margin more than halved to 2.9%. Net debts actually increased 5% to £87.7m, even though Mouchel has been cutting costs in recent months. Investors took flight on the results, sending Mouchel’s shares down another 29%. They have lost 84% of their value in the year to date, and the company’s market valuation is now just £13.5m.
Mouchel had a last minute scramble to arrange a £16m ‘top-up’ to its existing credit facilities and avoid breaching its banking covenants on publication of the FY results - even though it had refinanced its business only back in January (see here). It managed to achieve this, but there are various ‘associated costs’ and conditions imposed, which will put Mouchel’s management under even more pressure.
Mouchel’s order book at the end of July stood at £1.4bn vs. £1.8bn. But conversion is proving extremely difficult. In the year, Mouchel only managed £220m of new contracts and extensions. Although no overall comparisons were given for FY10, Mouchel’s highway business (which makes up c37% of revenue) last year secured £269m worth of new business alone. Unsurprisingly then, Mouchel’s outlook for the current year is ‘significantly reduced’.
If there is one glimmer of light for Mouchel it is that all new wins have come from BPO and IT-enabled services, which are typically higher margin and higher growth markets. The largest deal is Mouchel’s £148m win at Bournemouth Council, which it announced last November (see Mouchel secures Bournemouth BPO deal). The other wins were a five-year extension to its BPO partnership with Middlesbrough Council worth around £70m, and a £28.5m deal with the Highways Agency (HA), in a joint venture with Thales, to run the National Traffic Information Service (NTIS).
Mouchel has had to overcome distractions caused by the bid approaches from Costain and Interserve earlier this year (see here). But the operational problems and management changes have only made matters worse. New CEO Grant Rumbles now has the difficult task of restoring credibility to Mouchel's business, and delivering a satisfactory resolution for shareholders, staff and customers (see Mouchel looks for former Serco COO for salvation).