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Mouchel calms City with trading update containing no surprises

Mouchel has calmed the City today with a trading update on the year ended 31 July prior to entering its close period.

The update contained no further negative surprises following its profit warning in June.

Overall, prospects continue to be underpinned by a strong order book and healthy bidding pipeline, which stood at £1.9bn and £2.2bn respectively at 31 July 2009, compared with £2.0bn and £1.9bn respectively at the half year.

In terms of bidding for new work, the Group’s win rate during the last six months has been restored to within its target range of winning between 1 in 3 and 2 in 5 of tenders by value.

The statement also confirmed the firm has now largely completed the restructuring of the Group’s underperforming businesses in the Middle East, rail and management consulting and the impact of this will be reflected in the Group’s accounts for the year ended 31 July 2009.

In management consulting, it said it had completed the “right-sizing” of the business and the appointment of a new management team.

“We now have greater flexibility to respond to any future changes in demand for our services in this area,” it said.

The firm added that it was still owed money for work in Dubai, and that recouping the debts remains a slow process. It said it aimed to have the overall position resolved by the time it announces the Group’s preliminary results for the year ended 31 July 2009 in October.

Finally, it said it has now substantially exited the rail sector and is in the process of completing its major commitments with Network Rail.

“Notwithstanding the current economic situation, market conditions remain generally buoyant with continuing evidence of strong demand in all of our core markets - Government Services, Regulated Industries and Highways,” it said.

“In Government Services, we continue to target additional services with existing clients, particularly our major partnership contracts in Lincolnshire and Oldham, where we anticipate growth in 2009/10. We are pursuing the potential extension to our current commission in Middlesbrough and the new bundled services opportunity in North East Lincolnshire. Additionally, we have either been short-listed, or expect to be short-listed, for a number of other bundled services opportunities elsewhere as more local authorities seek to outsource services.   

“In Regulated Industries, we have now secured the five-year extension to our existing contract with United Utilities, which we hold in joint venture with Kier, Murphy and Interserve, and we expect to do likewise with Yorkshire Water in joint venture with Costain. We continue to bid for other opportunities under AMP5 with the major water companies in the UK. We are also pursuing specific opportunities with Severn Trent in the use of new technology for leakage detection and for revenue metering with Thames Water. 

“In Highways, our parking services business has now secured the Wandsworth contract to add to our existing commissions in Hillingdon and Newham. We have a strong pipeline of parking and traffic management opportunities elsewhere in

London, as well as with the Highways Agency in support of its Managed Motorways programme. We continue to bid the maintenance management commissions with the

Highways Agency in Area 13 (Cumbria) and Area 1 (South West) and have now been short-listed in consortium for the highways maintenance PFI contract in Sheffield. We have recently been successful in our tenders for the Northern Ireland Roads Services Major Projects Framework, the Transport Scotland ITS Framework and a design commission for the Highways Agency on the A14 corridor traffic management scheme. We are also awaiting the outcome of a number of other tenders with the Highways Agency and with several local authorities, including a five-year professional services contract in Lincolnshire.” 

At 31 July 2009, the Group’s net debt was broadly in line with expectations of around £100M. With banking facilities of £190M, the larger part of which remains in place until the second half of 2012, this continues to give the Group certainty of funding for the next three years.

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