SHARES in the support services group Mouchel plunged more than 33 per cent yesterday after chief executive Richard Cuthbert resigned as the firm revealed that a costly “actuarial error” would hit annual profits.
The maintenance and infrastructure firm said that a one-off gain announced in June – which it said would help offset contract cancellations – will be £4.3m lower than expected.
In a further setback, Mouchel said its new finance director Rod Harris had reviewed the group’s other contracts and has decided to increase provisions by a further £4.3m to cover risks to its contracts – a move it also took last year.
Mouchel, which earlier this year rejected a 164p a share takeover offer from rival Costain and a 135p per share bid from Interserve, saw shares fall as low as 15.5p in early morning trading before closing down 33.87 per cent at 20.5p.
Analysts said the firm was likely to lower their adjusted pre-tax profit forecasts from £14.3m to as low as £5m following the announcement.
Christopher Bamberry, an analyst at Peel Hunt, warned that the shortfall in profits makes it highly probably that it will breach its interest covenants.
“With a probable covenant breach and an over-leveraged balance sheet, it is hard to see how a rights issue can be avoided,” he said.
Mouchel said that Cuthbert had tendered his resignation with immediate effect and that he would work with the group for a short period to ensure an orderly handover.
Chairman Bo Lerenius will lead the company until a new chief executive has been appointed.