Outsourcing and consultancy group Mouchel says it will be able to save at least £21m a year but restructuring costs will hit its finances this year
The firm, which is restructuring both its business and its balance sheet following pre tax losses in 2010 and 2011, told investors today it could cut costs by £3m more than previously announced.
It will see most of the savings by September and the rest by the end of July 2013.
However it said a combination of restructuring costs and one-off items would hit its results this year.
The firm said it had completed its restructure into two divisions, Mouchel Infrastructure Services and Mouchel Business Services, which it said in March would result in the closure of 13 offices.
Restructuring in the Middle East cost the firm £2m but the division was now breaking even with reduced costs, Mouchel’s statement to the stock exchange said.
The firm also integrated its underperforming management consulting business into Mouchel Business Services in a bid to cut costs and improve margins.
The details of its balance sheet restructuring will be announced before its financial year end on 31 July 2012. The restructuring is likely to dilute the value of existing shares and result in the firm making provisions in its accounts for impairments on goodwill and intangible assets.
Previously the firm’s chief executive, Grant Rumbles, said the company was considering an equity raise which would dilute value for current shareholders. In today’s statement the firm confirmed all the financial restructuring options being considered would “result in there being only limited value for existing shareholders”.
The group has also begun a review of its operations focusing on contract profitability.
Mouchel’s statement said performance this year was affected by restructuring costs and “financial uncertainty surrounding the group”. But it added that Mouchel had won £165m of contracts this year with an order book of just over £1.1 billion and forward orders for 2013 of over £325m.
The group’s directors said they expected the firm to become profitable and generate cash once the restructuring plans were implemented.
Grant Rumbles, chief executive of Mouchel said: “We have continued to work with our clients, employees and key stakeholders to implement our strategic actions and are encouraged by the good progress made since the interim results. Although the environment remains challenging, the actions we are taking will create a platform for long term growth for Mouchel.
“The final piece to setting this platform for securing the long term future of the business is to complete the restructure of the balance sheet and we remain on track to announce this by our financial year end on 31 July 2012.”