Chief executive Richard Cuthbert resigns with immediate effect after company issues profit warning
The chief executive of Mouchel, Richard Cuthbert, has resigned with immediate effect after an £8.5m hole was discovered in the company’s accounts, the firm said today.
In a statement to the city, Mouchel said that it had discovered an “actuarial error” which meant that profits will be £4.3m less than anticipated on a particular unspecified “long term contract.”
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In addition a review of the business by the group’s new finance director, Rod Harris, has caused it to write down “a similar amount” after a re-evaluation of risks and project claims, “taking account the continuing challenging business environment.”
Mouchel’s share price opened 42% down, falling to less than half of last night’s 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 £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: “I would like to express the Board’s 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’s position in its core markets in the interests of all its stakeholders.”
Mouchel’s update doesn’t 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: “Underlying 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.”
Today it said: “On 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.
“The Group was very recently informed that, as a result of an actuarial error, the one-off gain will be £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.”
Earlier this year Costain offered £172m to buy Mouchel, an offer which was rejected on the grounds it did not value the company highly enough. Mouchel’s share price now values it at just £18.95m.