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Fri October 30 2020

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Mouchel cool on takeover talks

6 Dec 10 Consulting group Mouchel is preparing to sell non-core assets but has reacted coolly to approaches to take over the whole business, claiming that they undervalue the company.

In its latest trading statement, Mouchel said that its expectations for the year to July 2011 remain unchanged and it remains cautious about the short term trends in some markets. However, it has been “encouraged by greater clarity around client budgets and forward programmes”.

It also believes that a number of local authorities a closer to outsourcing and partnering with the private sector, a core part of Mouchel’s business and one that has been hit by public spending cuts.

A cost-cutting programme is on track to exceed the full-year cost savings target of £25m, with actions to achieve nearly 90% of these savings already implemented.  

“We expect the challenging market conditions of the last six months to continue for some time yet, but we also expect to see increasing long-term contract opportunities emerge in the first half of 2011,” the company said. “In the meantime, we continue to win new contracts and maintain great relationships with our clients.”

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Mouchel also revealed that it was “exploring alternative funding strategies” in case the review being conducted by Deloitte for its lending banks comes down against any further financing provision from the banks.

The company said: “We have reviewed the business and its future shape and organisation. As a result, we have commenced preparatory work on the potential sale of non-core businesses and on a possible equity fundraising.  We have also looked into alternative sources of funding and debt reduction. These are prudent measures to ensure that we maintain appropriate flexibility and maximise our long-term opportunities.

“We are already aware of interests in our non-core businesses. The significant fall in the group's share price over the last few weeks - which is indicative of the currently challenging environment but is principally due to the concerns that exist over the successful completion of the re-financing - has resulted in recent approaches to the company which would, if made, result in an offer being made for the company for the purposes of the City Code on Takeovers and Mergers. As a result the company is in an offer period for the purpose of the Code and a further announcement will be made in due course. The board does not believe that these preliminary approaches reflect the true value of the company.”

The company also announced several recent contract awards, which contribute to a £1.8bn order book.

  • A 10-year Incremental Partnership Contract with Bournemouth Borough Council was signed on 1 December with the transfer of staff and delivery responsibility for ICT, revenues and benefits services and facilities management. The contract, initially valued at £150m, has the potential to expand should further services be transferred in the future.
  • The £67m second phase of its 10-year Building Schools for the Future (BSF) contract with the London Borough of Hackney was awarded in November. This involves the design and construction of improvements to three schools in the Borough, with a further four schools to follow in phase three.
  • Agreement in principle reached with Milton Keynes Council on a five-year £12m programme for a range of services including public access, passenger transport, property and ICT.
  • Highway maintenance contracts in northwest Scotland and in Shropshire have been extended to May 2012 and March 2013 respectively. Together these contracts are worth about £8m a year. 

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