Mouchel reports drop in profits following serious accounting error
Mouchel has issued a profit warning and replaced its chief executive following a serious accountancy error, which is expected to lead to a £4.3m drop in profits.
The infrastructure services support group, which works with government agencies, local authorities and the private sector to provide clean water and cost effective energy and maintain roads and railways in the UK, reported the error last Thursday (October 6) in a trading statement, which caused it to downgraded its profits by £8.6m.
Its shares were also reported to have fallen by a further 7.7% to 12p, causing the company to loose a third of its market value.
As a result, chief executive Richard Cuthbert resigned from post with immediate effect after nine years in the role. Stepping into the role is former Serco group chief operating officer Grant Rumbles who joined the board today (October 13).
According to Mouchel, Mr Rumbles has extensive experience and knowledge of partnering and delivering outsourced services within the UK and internationally to both public and private sector clients.
Mr Rumbles said: "I am delighted to become the chief executive of Mouchel. Prior to my appointment, I have spent time with the board discussing the business and its future prospects. I believe Mouchel has a strong customer base and dedicated talented staff.
"Despite recent reductions in UK government spending, the future of government outsourcing both in the UK and overseas is assured and will continue to grow. Mouchel has the expertise and ability to deliver sustainable long term growth in both the public and private sector."
In the last week, Mouchel has been in discussions with lending banks regarding covenant breaches it anticipates will arise given the significantly reduced profits highlighted in its trading statement.
Mouchel's board said that all of the banks recognise that Mouchel is a "strong and valuable businesses, which needs to be supported by a stable, long term financial structure", adding that it is encouraged that the banks have been supportive and the discussions continue to be constructive.
It added that it will keep the market fully updated on any material developments.
In addition, Mouchel has also announced the departure of executive chairman Bo Lerenius, who also resigned from the board.
David Sugden has now been appointed to take over as interim chief executive and will work directly with finance director Rod Harris, who has decided to increase finance provisions against contract risks and claims by approximately £4m.
Mr Sugden joined the board of Mouchel in January of this year as a non-executive director as part of the process of strengthening the Mouchel board.
Mr Sugden said: "We are sincerely grateful to Bo Lerenius for his important contribution to Mouchel. We are strengthened by the appointment of Grant Rumbles and I would like to thank Bo for leading the search and attracting such an excellent candidate.
"Mouchel is a company with strong market positions but one which needs strong operational direction and I'm confident Grant is the right man with the right experience for the job. In my role as executive chairman, with our new finance director Rod Harris, I will be focused on ensuring Mouchel has a clear strategy and a sound financial structure, whilst building our relationships with our shareholders and our banks."