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The chief executive of Mouchel, Richard Cuthbert, has resigned with immediate effect after an 拢8.5m hole was discovered in the company鈥檚 accounts, the firm said today.

In a statement to the city, Mouchel said that it had discovered an 鈥渁ctuarial error鈥� which meant that profits will be 拢4.3m less than anticipated on a particular unspecified 鈥渓ong term contract.鈥�

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In addition a review of the business by the group鈥檚 new finance director, Rod Harris, has caused it to write down 鈥渁 similar amount鈥� after a re-evaluation of risks and project claims, 鈥渢aking account the continuing challenging business environment.鈥�

Mouchel鈥檚 share price opened 42% down, falling to less than half of last night鈥檚 closing price of 31p. It is currently trading 46% down. The falls mean its shares are now less than 10% of the value they had whilst being courted for acquisition by rival Costain at the start of the year.

The company declined to say what the actuarial error was that caused the 拢4.3m write-down, or what contracts it related to. Actuaries measure risk in businesses and are used primarily in the insurance industry.

The firm said Cuthbert will work with it for a short period to ensure an orderly handover. Chairman Bo Lerenius will become executive chairman until a new chief executive is appointed.  Lerenius said: 鈥淚 would like to express the Board鈥檚 gratitude to Rich for his many years of service and his continuing belief in and commitment to the business.  The Board will focus on maintaining Mouchel鈥檚 position in its core markets in the interests of all its stakeholders.鈥�

Mouchel鈥檚 update doesn鈥檛 say what contract the provision relates to, though it stated it is the same contract that in June it said would provide a significant one-off profit which was enough to cover lower than expected returns elsewhere.

In June, the same time as Harris was appointed, Mouchel said: 鈥淯nderlying trading is in line with our expectations. In addition, during the year we have negotiated commercial conclusions to a number of contracts, including our exit from certain activities. Some of these negotiations have led to higher costs or lower profitability than originally expected, although these have been offset by a significant one-off gain on one of our long-term contracts.鈥�

Today it said: 鈥淥n 15 June 2011, the Group reported that it expected a significant one-off profit on one of its long-term contracts to offset lower profitability than originally expected following commercial conclusions on a number of contracts.

鈥淭he Group was very recently informed that, as a result of an actuarial error, the one-off gain will be 拢4.3m lower than previously expected which has an immediate and corresponding impact on the profits the Group will report for the year to 31 July 2011.鈥�

Earlier this year Costain offered 拢172m to buy Mouchel, an offer which was rejected on the grounds it did not value the company highly enough. Mouchel鈥檚 share price now values it at just 拢18.95m.