Embattled Mouchel is now disposing of its rail support services business to Australia-based engineering and support services company Sinclair Knight Merz (SKM), for £3.4m in cash. This will be put towards paying off some of its debt pile, unfortunately a mere drop in the ocean compared to its current net debt of £87.4m (see here). This disposal is of course the first change made by new CEO Grant Rumbles since his appointment last week (see Mouchel looks to former Serco COO for salvation), and follows the resignation of interim chairman David Sugden over the weekend (see here), just days into the job.
The rail business concerned made revenue of £13.6m in FY10 (which was down 40% on the previous year) and reported profit after tax and ‘exceptionals’ of £800k. Mouchel had already decided to withdraw from the rail business in 2010. So SKM was clearly in a strong position to name its price, and did so with a price sales ratio of just 0.3.
Mouchel will still have £2.5m of debt tied up in the rail business, and has committed to fund future work up to a maximum of £750k. SKM is also charging Mouchel a 5% administration fee to help it recover the £2.5m from debtors and work-in-progress.
This deal goes to show just how tough a task Mouchel now has to shore up its business, and dispose of assets that can realise some true value.