Rivals circle Mouchel as cuts take toll

 
City A.M. Reporter
OUTSOURCER Mouchel yesterday said it had recently received bid approaches, sending its shares soaring as they recovered a fraction of the ground lost in the wake of government spending cuts.

The news overshadowed warnings that trading conditions remain challenging and that the company may have to turn to shareholders for fresh funds if it is unable to reach a new deal with its banks.

“The announcement from Mouchel takes shareholders in conflicting directions in our view, but the most eye-catching news is the fact that the company has received approaches,” Arbuthnot analyst Nick Spoliar said in a research note.

“The news on trading is no better than it was before,” Spoliar added, noting that while expressing confidence that refinancing is going to plan, “the door is also left open for a fund-raising”.

Mouchel, which helps maintain highways and provides consultancy services to local authorities, has been hit hard by UK government.

The company said it did not believe the approaches received reflected the value of the company and that it was also preparing the possible sale of non-core businesses and was “already aware of interests” in them.

Negotiations relating to the re-financing of its banking facilities are going as planned, the company said, repeating that it expected to agree new facilities by March.

“We are not however complacent about this and are therefore simultaneously exploring alternative funding strategies,” 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.”

It also said net debt was £109m at the end of November, down from £126m pounds at the same time year, and that it was on track to exceed its full-year cost savings target of £25m.

Shares in the firm, which had fallen some 70 per cent since the start of the year, initially rose 15.75p on the day, before closing up 28 per cent at 72p.