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Mouchel has appointed Rod Harris, the former FD of Carillion Business Services, as its new group FD. Harris replaces outgoing FD David Tilston, who appointed Harris in autumn 2010 as Mouchel’s group financial controller. Tilston himself joined the board last September to renegotiate Mouchel's banking facilities (see Mouchel secures new funding, appoints M&A advisor). Of course during Tilston’s tenure Mouchel has been fighting on all fronts to remain an independent company with various bids from support services rivals Costain and Interserve – and finally getting its reprieve in April (see Mouchel free at last!).
Mouchel said it remains in line with market expectations for FY11, even though the business is still struggling with the short-term outlook “very challenging”. Local government in particular, which makes up more than two-thirds of Mouchel’s client base, “has been particularly hard hit by the unexpected speed and depth of these cuts.” Mouchel's pipeline of opportunities has dropped 21% from the same point last year to £1.5b. There’s no doubt that the distractions it faced earlier this year have also played their part. However the escalating debt is a real concern. It now stands at £109m at the end of May vs. £97m at the end of H1. Investors continue to see the risks, and cut 10% off Mouchel’s share price.
While the rest of the business continues to be up against it, there are some pockets of real opportunity. As we expect, opportunities in local government BPO seem to be benefitting from the public sector cut backs. Mouchel is now expecting its BPO deals at Bournemouth, Lincolnshire, Rochdale and Oldham to expand in 2011/12, and its pipeline of BPO opportunities is also “increasing significantly” with half a dozen live prospects and the same number at the early stages of procurement.
Mouchel has been successful in winning £200m of new business and extensions YTD, including its win at Bournemouth Council last November (see Mouchel secures Bournemouth BPO deal). Its biggest new win in the second half, was the seven-year £57m National Traffic Information Service (NTIS) deal for the Highways Agency, in joint venture with Thales UK. It also secured a five-year extension to its BPO partnership with Middlesbrough Council, worth c£70m.
Beyond that, it is working closely with Carillion on the really big opportunity – the Sheffield PFI highways maintenance tender where it is one of two remaining bidders. If successful, this contract will be worth £2bn over 25 years - although it isn't clear how much of that will come Mouchel's way. It is also bidding for highway maintenance contracts in Scotland. Mouchel will be hoping that with Harris now in place as group FD, it will help drive this partnership forwards, and who knows where that might lead.
