Richard Cuthbert, CEO of embattled BPO and support services provider Mouchel, has resigned with immediate effect, after the company warned that full year profits will be £4.3m lower than expected due to an ‘actuarial error’ it recently uncovered on a contract expected to deliver a ‘significant one-off profit’. Shares in Mouchel slumped on the news, some 37%.
The contract concerned was supposed to offset lower profitability on a number of other contracts, which had been subject to renegotiations. Analysts had been expecting FY earnings of 9.3 pence per share vs. 18.9 in FY10. So this return is now destined to be even lower.
Cuthbert is being replaced temporarily by chairman Bo Lerenius, who will take on the role of exec chairman until a new CE has been appointed. Cuthbert was in charge during Mouchel’s various rejected approaches by construction companies Costain for 164 pence per share, and then Interserve for 135 pps (see Mouchel rejects reduced Costain and Interserve offers), before both companies walked away in April. We suspect Costain and Interserve spotted something ‘under the covers’ back then after looking at Mouchel’s books in detail.
This latest twist leaves Mouchel deep in the mire. Its shares alone have slumped 86% year to date, and they now trade at 19.5 pence - over seven times lower than the bids tabled by Costain and Interserve just six months ago. Of course Mouchel also rejected a much higher 260 pps offer from erstwhile VT Group back in December 2009, which is now owned by support services giant Babcock.
Aside from looking for a new CEO, Lerenius said the board will now focus on ‘maintaining Mouchel's position in its core markets in the interests of all its stakeholders’. But it still unclear how Mouchel intends to achieve this aim.