THE crisis at infrastructure firm Mouchel has been laid bare after it posted annual losses of £65m and predicted more pain to come.
Mouchel, which provides consulting and business services on road building and other public sector projects, has been rocked by Government spending cuts and under-performance.
It secured a lifeline this week by agreeing amended terms on banking facilities due to expire in March 2014, but in its delayed results announcement it said expectations for the coming year were “significantly reduced”.
The company’s order book has shrunk to £1.4bn from £1.8bn a year earlier and new chief executive Grant Rumbles admitted economic conditions will squeeze margins and force clients to cut back on spending.
Rumbles, who took the helm two months ago, will oversee more cost cuts and an overhaul of the company’s balance sheet.
But he said that uncertainty over Mouchel’s financial position and recent takeover speculation had affected the company’s ability to win new business.
“The outlook for Mouchel is challenging in the short term,” he added.
Revenues were down by 13% to £551.4m in the year to July 31, while a string of exceptional items caused bottom-line losses to hit £64.8m, compared with a deficit of £14.7m a year earlier. Mouchel is responsible for maintenance and operations on a substantial portion of England’s motorway and trunk road network.
It also works within the Ministry of Defence and with major defence contractors, such as General Dynamics, Lockheed Martin and BAE Systems.
In order to avoid a breach of its banking facilities, Mouchel’s lending covenants have been amended.
The move was agreed in return for more fees and the right of lenders to subscribe for 5% of the company’s shares.
The balance sheet restructuring will also take place before the end of the current financial year.
Rumbles added: “I will be reviewing every aspect of our business, including the markets we operate in, our operating model and the management structure.
“I will be looking aggressively at our cost base and particularly at our supporting functions and central overheads. I know that we can do much better.”
Shares fell by a quarter yesterday to 12.6p, a fraction of the value of takeover bids it received earlier in the year from rival support services firms Costain and Interserve, both of which the company rebuffed.
Mouchel said contract wins during the year included a joint venture with Thales to run the National Traffic Information Service, worth £28m over seven years. It has also secured a five-year extension to an outsourcing contract with Middlesbrough Council worth £70m.