Further turmoil as firm says banking covenants will be breached and chair is latest to resign

Shares in consultant and outsourcing giant Mouchel have dropped further as the firm announced it will breach banking covenants, delay publication of accounts, and that its chairman will step down.

The grim financial news caused shares to drop 9.6%, and overshadowed the announcement of the appointment of a new chief executive, Grant Rumbles, who will start at the firm immediately.

Mouchel, which said last week it expected profits to be more than £8m lower than anticipated, said it had commenced discussions with its banks over “covenant breaches which are anticipated to arise given the reduced profits highlighted in the trading statement.”

It said the banks had been “supportive” and “constructive” and that KPMG had been employed to provide the banks with a report to help them secure new financing.

Mouchel said: “In view of the importance of these discussions the Board has concluded that it should defer the intended date of publication of the report and accounts for the year ended 31 July 2011, to 30 November 2011.”

Mouchel’s chief executive Richard Cuthbert resigned last week on publication of the profit warning, and the firm said today that its chair Bo Lerenius had “decided to stand down from the board” upon the hiring of a replacement chief executive.

David Sugden, previously non-executive director of Mouchel, will take over as interim Chairman.

The further share price falls, to as low as 11.4p today, mean the £630m turnover firm is now worth just £13.2m. Its value has fallen by almost two-thirds since its profit warning last week, and it is worth less than a tenth of its value at the start of the year, when both Costain and Interserve made offers to buy the firm. Costain bid more than £170m for the company.

New chief executive Grant Rumbles was chief operating officer at Serco from 2004 to 2008, spending a total of 25 years with the firm. He was subsequently chief executive  of Exova plc, an international Testing, Advisory and Assurance services business from 2008 to 2011. Interim chair David Sugden has company turnaround experience, having stepped in as executive chairman of home shopping company Findel plc to take charge of the company’s refinancing. He remains chairman of Findel plc and is a non-executive director of Greencore Group plc.