Interim Management Statement
Implementation of strategic review actions on track,
capital structure review progressing
Mouchel Group plc
("Mouchel"
), the infrastructure and business services Group, today
issues its Interim Management Statement for the period from
1 February 2012 to 11 June 2012.
Summary:
· Implementation of
strategic review actions continues:
o Reorganisation of business with
two clear divisions in place
o Craig Apsey appointed Managing
Director of Mouchel Business Services
o Previously announced overhead
cost reduction programme on track; at least
£3 million of additional overhead cost
savings identified, increasing target from
£18m to
£21m
o Costs reduced in Middle East
business, now operating on a break-even basis; one-off cost
of £2m
· Review
of options to provide Mouchel with a long term sustainable
capital structure is progressing with a balance sheet
restructuring due to be announced prior to the year end on
31 July 2012
· All the
options being considered will result in there being only
limited value for existing shareholders
·
Underlying business continues to perform well despite
the on-going uncertainty around the balance sheet;
£165m of contracts secured in financial
year to date. Order book is stable at just over
£1.1billion and forward orders for 2013
now total over £325m
· Costs
related to on-going operational restructuring and
anticipated financial restructuring will impact the current
year financial performance
Grant Rumbles, CEO of Mouchel said:
"We have continued to work with our
clients, employees and key stakeholders to implement our
strategic actions and are encouraged by the good progress
made since the interim results. Although the environment
remains challenging, the actions we are taking will create
a platform for long term growth for Mouchel. The final
piece to setting this platform for securing the long term
future of the business is to complete the restructure of
the balance sheet and we remain on track to announce this
by our financial year end on 31 July 2012.
Update on Strategic Review actions
As announced at our interim results on 29 March 2012,
Mouchel completed a comprehensive strategic review, which
identified four key strategic actions to return the
business to profitability and create a robust platform to
deliver sustainable growth.
1. Simplify organisation structure
We have now successfully implemented the
reorganisation of the business into two divisions, Mouchel
Infrastructure Services
('MIS'
) and Mouchel Business Services
('MBS'
). We recently announced a key appointment of Craig Apsey,
as Managing Director of MBS, who joins from BT, where he
previously led the operations and growth strategy for their
Local Government division, a business similar to
MBS.
This reorganisation is already facilitating a greater
focus on our clients and has also led to additional cost
synergies being identified.
2. Focus on our core strengths
Mouchel's underlying
business continues to remain resilient, despite the ongoing
uncertainty around the balance sheet. We have
secured £165m of contracts this
year and the order book is stable at just over
£1.1 billion and forward orders for 2013
now total over £325m.
Our joint venture, EnterpriseMouchel has recently
submitted bids for three London Highways Alliance
Contracts. We also await the result of our Transerv joint
venture bids, in partnership with Balfour Beatty, for two
4G Transport Scotland contracts. Our Australian business
continues to demonstrate a number of potential
opportunities for growth, including bidding for additional
services in the Perth ISA, and with our partner Downer, we
are preparing our first private sector bid for asset
management.
We have been appointed to provide services to both
Anglian Water and Dwr Cymru Welsh Water under the AMP5
framework. Mouchel now serves all 12 water and sewerage
companies in England and Wales.
We have reduced costs in our Middle East business,
which is now operating on a break-even basis. In order to
attain this position we have incurred a loss of
approximately £2 million in 2012
as we implemented the restructuring We remain confident in
the medium and long term prospects for our business in the
Middle East where there are multiple opportunities for
growth.
In order to focus our resources more efficiently, we
are integrating our management consultants directly into
MBS. The Management Consulting business has continued to
underperform and through this integration, we will further
reduce our overhead costs, improve operating margins and
ensure that our business is fully focussed on key client
delivery.
3. Reduce overhead costs
In our interim results, we announced that we had
identified £18 million of central
cost savings. The cost saving programme is running to plan
and we expect the majority of this to be attained by
September 2012. In addition, we have identified further
central and divisional cost savings such that we now expect
total cost savings of at least
£21 million per annum.The
majority of the changes will have been actioned by the end
of September and the full benefit of these cost savings
will impact the second half of the year to 31 July
2013.
4. Focus on contract profitability
We have commenced a systematic review of our
operations to further improve their efficiency. We expect
this will enhance both our operational effectiveness and
efficiency in the medium term.
Update on capital structure review
We continue actively to progress options to provide
Mouchel with a long term sustainable capital structure and
we remain on track to announce a balance sheet
restructuring prior to the year end on 31 July 2012. All
options being considered will result in there being only
limited value for existing shareholders.
Financial performance
Performance in the current year continues to be
impacted by the financial uncertainty surrounding the Group
and associated costs involved in the operational
restructuring of the business. Apart from the Middle East
and Management Consulting operations the underlying
business is performing broadly in line with management
expectations. However a combination of the costs involved
in the restructuring and one off items relating to legacy
issues identified as part of this exercise will impact in
the current year.
In addition as part of the balance sheet
restructuring exercise we will make provisions for
impairment on goodwill and intangible assets to bring the
carrying values of those items into line with the new
operational structure and recognising the changes in the
scale of the business.
We have made improvements to our working capital
management and the business will be cash generative in the
second half at an operating level before the cash costs
associated with the restructuring.
Mouchel's banks remain
supportive, having agreed amendments at the time of the
interim results to provide flexibility in the
implementation of our restructuring plans.
Outlook
The Group is in a period of transition as we
implement our restructuring plans to achieve the benefits
of being a smaller more streamlined organisation with a
lower cost base. Once these actions are implemented fully,
the Directors believe that Mouchel return to being a
profitable and cash generative business with the balance
sheet restructured to give us the correct long term funding
structure. This will position us well to compete
effectively once more in our markets, which continue to
provide attractive long term outsourcing opportunities both
within the UK and internationally.
For further information, please contact:
Mouchel Group plc
Grant Rumbles, Chief Executive
Rod Harris, Group Finance Director
01483 731731
Brunswick Group
Mike Smith/Azhar Khan
020 7404 5959
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