Exclusive: Mouchel boss says consultant could exit its ownership deal with its banks within five years

mouchel

Mouchel could exit its ownership deal with its banks within five years, the consultant鈥檚 chief executive Grant Rumbles has said.

Speaking to 黑洞社区 this week, Rumbles said the firm 鈥 which was delisted from the London stock exchange and sold to its banks through a pre-pack administration last Friday 鈥 could return to the stock market in 鈥渇ive years鈥.

Other potential exits from the ownership deal include a sale to a private equity firm or to a bigger business, Rumbles said.

Mouchel鈥檚 banks 鈥 RBS, Lloyds Banking Group and Barclays 鈥 agreed to write-off 拢87m debt in return for 95% ownership of the company, now the newly-incoporated MRBL Limited.

Mouchel鈥檚 management retain 5% of the ownership, although this could rise to a maximum of 20% depending on the value the company realises on its exit from the ownership deal with the banks, Rumbles said.

Despite their majority shareholding, Rumbles said the banks would not interfere in the management of the company and added the firm would not be broken up and sold.

He said: 鈥淸The banks] have bought into our strategy. The banks don鈥檛 have any positions on our board, nor do they want one.鈥

The sale capped a tumultuous year for the firm, which was hit by accounting errors, contract mistakes, management resignations and failed takeover attempts for the company.

Mouchel shares have fallen from a high of 485p [check] in 2008 and were suspended on Friday at 0.95p

Mouchel was sold via a pre-pack administration after shareholders failed to back a restructuring plan that would have seen them receive a special dividend of 1 pence per share 鈥 under the alternative deal shareholders received no value for their shares.

Only 70% of shareholders backed the restructuring plan, just short of the 75% threshold required. Only 20% of shareholders voted on the motion.

Rumbles said: 鈥淲e constructed a deal with our lenders where we could recover some value for our shareholders. I鈥檓 disappointed for the majority of shareholders who voted in favour [that this did not pass]鈥.

Rumbles said the restructuring deal would ensure the 120-year-old business鈥檚 future and secure more than 8,000 jobs.

The deal reduces the firm鈥檚 debt from 拢147m to 拢60m, which Rumbles said was a 鈥減erfect鈥 level for the 拢551.4m-turnover firm to operate with.

He said the deal would give the firm the financial security to bid for longer term outsourcing contracts from 2013, which the firm had not been able to bid for during its period of financial turmoil.

He said: 鈥淲e haven鈥檛 been able to bid for longer term contracts because clients have been worried we wouldn鈥檛 be around to complete the contract. Now clients can select us like anyone else.鈥

Mouchel Graphic

He said the firm was well-positioned after its March restructure and that its two divisions 鈥 Mouchel Infrastructure Services and Mouchel Business Services 鈥 held number two and three spots in the UK market respectively.

He said the firm will also target growth in its Middle East and Australian businesses.

Mouchel first introduced reinforced concrete to Britain in 1897 but evolved into an engineering consultancy.

It built the Royal Liver 黑洞社区 in Liverpool in 1909 and the cooling towers of Battersea power station in London.



Timeline: Mouchel鈥檚 two years

HS2

Oct 2010 Issues profit warning then posts full year pre-tax losses of 拢14.75m and announces the axing of 200 managers

Dec 2010 Deloitte is brought in to undertake a 鈥渢argeted business review鈥 of the company. Mouchel rejects a first takeover bid from Costain, valued at 拢119m

Jan 2011 Rejects a second Costain bid valued at 拢150m - only for Costain to up its offer to 拢170m. Reports suggest Carillion, Balfour Beatty and Capita are also taking an interest.Mouchel completes a 拢170m refinancing deal

Feb 2011 Rebuffs Costain offer in favour of advanced talks with Interserve

Mar 2011 Mouchel rejects both bids from Costain and Interserve. The firm says Interserve鈥檚 offer 鈥渟ignificantly undervalues the business鈥 and Costain鈥檚 proposal had an 鈥渦nacceptably high level of execution risk鈥

Jun 2011 Admits order book has been hit by Costain and Interserve鈥檚 failed takeover bids

Oct 2011

  • Chief executive Richard Cuthbert quits after an 拢8.5m hole is discovered in the company鈥檚 accounts. Grant Rumbles is appointed as replacement.
  • Shares drop as the company admits it will breach banking covenants, has delayed publication of its accounts and announces that its chairman Bo Lerenius will step down. Interim chairman David Sugden lasts in the role for just three days, to be replaced by former BBC Trust chairman Sir Michael Lyons.
  • Offloads its 拢13.6m-turnover rail business to Australian consultant Sinclair Knight Merz for 拢3.4m and its 拢4.7m-turnover pipeline design business to engineer Mott MacDonald for 拢2.55m

Dec 2011

Appoints fourth chairman in three months - former chair of housebuilder Crest Nicholson, David Shearer

Mar 2012 Restructures the business into two divisions - Mouchel Infrastructure Services and Mouchel Business Services. Closes 13 offices and announces a half-year loss of 拢11.6m

1 Aug 2012 Firm announces restructuring plan to sell up to its banks and delist from the stock exchange

24 Aug 2012 Shareholders fail to back the restructuring plan and a special dividend offer of 1p per share. The firm enters administration and its assets are bought by MRBL Limited, owned by Mouchel鈥檚 bankers

 

Analysts鈥 views

Robin Speakman

Robin Speakman, analyst at Shore Capital

In reality it was Mouchel鈥檚 over-indebtedness and problems relating to individual contract formation and accounting that brought us to this point.

The fault is not with the outsourcing market - the majority of outsourcing contracts are working and delivering value for tax payers.

Mouchel probably should have sold [to one of the interested parties] but it begs the question, why didn鈥檛 they?

Despite the administration there鈥檚 still a strong order book there and even though the equity is wiped out it will continue to trade.

Tony Williams

Tony Williams, analyst at 黑洞社区 Value

The rejection of the restructuring plan leaves Mouchel鈥檚 ordinary shareholders with nothing. Remember, too, that its share price peaked at 479p in December 2007. Nor is it the first casualty of this recession in which, by the end of 2012, UK construction output will have fallen by almost 12% in real terms.

But Mouchel made its own problems, too, viz the 拢8.5m accounting hole back in the autumn of 2008; and the even more critical issue of its debt - without which it may well have survived.

Going forward, and after a ruthless pre-pack administration, it lives to fight another a day; or at least another day until it is sold to a trade buyer - that is, forget any thoughts of a return to the stock market.