6 October 2011 – trading update
Following the pre-close trading update on 4 August, a further trading update has been provided. In an Interim Management Statement on 15 June, the company 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. It has now come to light that as a result of an actuarial error, the one-off gain will be £4.3m lower than previously expected. This will have an immediate and corresponding impact on the profitswhich will be reported for the year to 31 July 2011. Furthermore, as part of the year-end audit process, Finance Director Rod Harris has reviewed contract risks and project claims. As a result, Mouchel has decided to increase provisions in respect of these contract risks and project claims by a similar amount to the reduction in the one-off gain.
Although these are non-cash items, this is clearly very bad news and Chief Executive Richard Cuthbert has tendered his resignation with immediate effect. Bo Lerenius will become executive Chairman until a new Chief Executive has been appointed. The downward spiral for shareholders continues and given current market conditions, there are other alternatives which offer a safer bet. Despite potential for a strong rebound in the share price, there is now too much uncertainty. AVOID.