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Chief offered £1.45m to save Mouchel

The new chief executive of Mouchel could receive up to £1.45 million in salary and bonuses if he can turn the company around in the next two years.

On top of his £320,000 annual salary, Grant Rumbles is eligible for a bonus worth 150 per cent of his salary in the first year and 100 per cent the following year.

New finance director Rod Harris, who earns £200,000, can receive a bonus worth 100 per cent of his salary and then 75 per cent. The bonus scheme is based on pre-tax profit targets along with successful refinancing and net debt reduction goals.

The details were provided in the company’s annual report as it posted a £64.8m loss for the year to July 2011 on turnover of £551.4m, compared with a £14.8m loss the year before on sales of £632.6m.

Mouchel’s remuneration committee said the level was “appropriate” because the pair are on lower salaries than both their predecessors – and lower than would otherwise have been necessary to recruit them.

It said there are also significant short-term challenges facing the business and that there will be no long-term incentive award until it is stabilised.

Mr Rumbles told Construction News that he and Mr Harris are now “looking at every option” as they conduct a “deep dive” into the business – including a rights issue, a debt for equity swap, disposal of divisions, or the ultimate sale of the firm.

The review is expected to be completed by the time the company announces its interim results in March. It comes after Mouchel negotiated £180m of new banking facilities last Tuesday  to avoid breaching its existing loan covenants.

Mr Rumbles said his 25 years with services giant Serco made Mouchel a good fit for him.

He added: “I’m very good at fixing problems and frankly Mouchel is a problem.

“We had 8,000 people here who were in a great deal of difficulty and I thought I could help.”

Mr Rumbles said Mouchel had a strong underlying business and pointed out that 90 per cent of its work was in the public sector at the time of the Comprehensive Spending Review last year.

At the same time, takeover bids and internal disruptions had all damaged chances of winning new work, Mr Rumbles said. But he was also clear that the company was not “fit for purpose” as it stands.

Accountants Ernst and Young are looking into a restructuring of the company, which Mr Rumbles says is operating with systems designed for a firm three times its size – for example, using a £5m SAP accountancy software system when a £1m system would suffice.

The company also had to pay £4.5m of exceptional items relating to poor contracts, including a business process re-engineering contract in the Middle East.

He said: “Some of the choices in the business haven’t been the best and the way it bid for contracts, it possibly did not understand some of the risks it was taking.

“In terms of our existing clients and doing additional work with them, I don’t think it is a problem.

“In terms of winning new, big contracts, it is a problem, and I think it will be a problem until we get our balance sheet sorted out.”

Mr Rumbles could not rule out cuts to the workforce, although he emphasised that skilled staff are central to Mouchel’s future.

The management consultancy division, which recorded a £26m drop in sales last year, could be where jobs are shed.

In February and March, when Interserve and Costain made takeover bids, the firm’s share price was at 155p. The share price was 10p by the end of last week.

Mr Rumbles declined to comment on recent approaches.

Finance facts

·         Director salaries and benefits for 2011 rose to £1.3m from £947,000 the year before.

·         Former chief executive Richard Cuthbert and former FD David Tilston earned £410,000 and £250,000 respectively and were not on a bonus scheme.

·         Former BBC Trust chairman Sir Michael Lyons saw his salary rise from £38,000 to £300,000 on 15 October 2011 as he went from part-time to full-time to lead the Mouchel board. He is paid on a pro rata basis for three months; his pay falls to £200,000 a year thereafter.

·         After chairman Bo Lerenius stood down, David Sugden was in place for just two days before he resigned.  Mr Lyons is now interim chairman, though the company has formed a shortlist.

·         Rod Harris is the third finance director in a year after Mr Tilston, who joined in September last year and Kevin Young, who had been at the firm since 1999.

·         The annual results were delayed by a profit warning and an actuarial error which reduced profits by £4m, while annual results reveal a reduced contract win rate and liabilities that outweigh its assets.

·         The company sold its rail business to Sinclair Knight Merz for £3.4m and energy division to Mott Macdonald for about £3m to help tackle the £87.7m of debt.

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