Plans include closing 13 offices and streamlining management structure.
The company will focus more on its traditional civil engineering consultancy business and stop bidding for local authority outsourcing contracts that it has no chance of winning until its balance sheet is back in shape.
“Although each part of the business is profitable, the contribution each makes to the business is not sufficient to cover central overheads,” said Grant Rumbles, who was brought in as chief executive last October after an £8.6m hole was found in the accounts, compounding problems for a business that had already lost £65m before tax the previous year.
In the six months to 31 January 2012 Mouchel made a pre-tax loss of £11.6m on turnover steady at £270m. Only £5.3m of that loss was made up of exceptional items.
Mr Rumbles said that the firm’s banks remained supportive and have agreed further amendments to facility agreements to enable the restructuring. Net bank borrowings are £104.1m, an increase of £7.2m from 31 January 2011.
In a root and branch reorganisation the current four divisions, with 14 operating groups and three business development functions, will be cut to two divisions to cut overheads: Mouchel Infrastructure Services and Mouchel Business Services. These two divisions will have their own management teams and boards, allowing corporate head office costs to be reduced.
Most of the £18m savings from overheads will be achieved by closing 13 properties. The target is to implement the majority of the savings by the end of September 2012 and the remainder by July 2014.
The business strategy is to focus on core strengths of highways and water in the UK, Australia and the Middle East.
The local government outsourcing business, to be in Mouchel Business Services, will focus on retaining and growing existing contracts and improving profitability. It will not spend money chasing new business until the balance sheet has been restructured.
As part of the strategic review the pipeline of future revenue opportunities has been ‘cleansed’, reducing it by £670m to £1,507m to focus on only the most profitable opportunities. The company aims to improve its win rate ‘by implementing new processes and targeting our people and resources at key opportunities. We will also bring in additional people with proven track records to improve bid performance where necessary.’
All options are being evaluated for restructuring the balance sheet, including ‘a significantly dilutive’ equity raise. The restructure is expected to be completed by the end of the 2012 financial year, which is 31 July.
Mr Rumbles commented: "2012 is a year of transition for Mouchel. The first half of this financial year has remained challenging, but we are seeing signs of stabilisation in our core markets. We have completed our strategic review, which looks at every aspect of the business, and have started implementing the changes required to build on our market-leading positions in infrastructure and business services. These changes will concentrate on simplifying our operations and significantly reducing group support costs, while improving our technical ability and client focus. The changes we are announcing today will enhance our ability to deliver operational excellence to our clients.”
Got a story? Email news@theconstructionindex.co.uk
