UK public service cuts hit Mouchel

The crisis at infrastructure firm Mouchel was laid bare yesterday after it posted annual losses of almost £65 million and predicted more pain to come.

The company, which provides consulting and business services on road building and other public sector projects, has been rocked by government spending cuts and under-performance in certain parts of its operation.

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 £1.4 billion 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 said that uncertainty over Mouchel’s financial position and recent takeover speculation had affected the group’s ability to win business.

“The outlook for Mouchel is challenging in the short term,” he added.

Revenues were down by 13 per cent to £551.4m in the year to 31 July, while a string of exceptional items caused bottom-line losses to hit £64.8m, compared with a deficit of £14.7m a year earlier.

Shares fell by 30 per cent to 12.25p, 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.