Mouchel is evaluating a ‘significantly dilutive' equity raise as one of the options to help lift it out of the mire. Not the greatest news for shareholders who have already seen their shares slump 90% over the past year to c11pence.
Something drastic does need to be done. At half time – the six months ended 31 January – Mouchel made an underlying operating loss of £1m vs. an operating profit of £8.9m in H110. At the pre-tax level, losses went up more than ten-fold to £11.6m. Revenue meanwhile flat-lined at £270m – which given the problems Mouchel is facing is actually something of a result.
However with an order book down 38% to £1.16bn, and its removal from the £130m BPO at Rochdale due to take effect in May 2012, Mouchel’s revenue is likely to start sliding too. Particularly concerning, but not in the least bit surprising, is that Mouchel said it is not pre-qualified for any new large BPO contracts due to its financial position.
Despite a year of restructuring, Mouchel’s net bank borrowings actually increased 7.4% to £104m. It said that its banks are supportive of its financial position, but it is now going through another cost cutting exercise – this time to remove £18m from overheads, which will be achieved in a large part by closing 13 properties. The majority of these savings will be delivered by September – so plenty of pain still to come.
Following a strategic review, Mouchel now operates across two divisions – Mouchel Infrastructure Services and Mouchel Business Services, with the embattled management consulting capabilities now facing into MBS. This simplified structure should make it easier for Mouchel to attract interest from potential acquirers. However resolving Mouchel’s various problems is taking too long. All the while the value in its underlying business continues to erode.