Mouchel hit by government austerity drive

Consultant Mouchel has said austerity measures by the new coalition government have hit trading in recent weeks.

In a trading update to the City this morning, the company said: “The timing and the impact of these measures have been particularly noticeable in the more discretionary areas of expenditure, for example in highways scheme workload and in schools capital programmes.”

As a result of the fall, it has begun another round of cost-cutting, including among staff, although didn’t provide detailed information.

Despite the downbeat message, it said it was confident about the longer-term possibility of winning outsourced work from government.

It said: “We remain confident about the medium and long-term, particularly given the pressure that will remain on the public sector to find new ways to deliver services more efficiently. A number of local authorities are now looking to outsource services to the private sector for the first time and indeed, we expect opportunities to increase further once things start to settle down after the summer and as organisations move beyond short-term cost-cutting.”

The disposal of its Middle East business has not been completed despite initial estimates that it would happen by its year end on 31 July. It is now expected to be completed in the first-half of its next financial year.

In the region, the company said it was “encouraged” by the offer from Nakheel that certified amounts would be settled 40% in cash and 60% by way of a five-year interest-bearing bond.

It added: “Other amounts will take longer to recover but the process continues and also includes other clients in the region. Our cash flow forecasts still include very little for collection of Dubai contract receivables, most of which have now either been impaired or are likely to form part of the planned sale of the Middle East business.”

The company also announced third-party bonding facilities to give it more banking headroom. It said: “We are operating comfortably within our banking covenants and remain confident that this will continue to be the case going forward.”

Concern over whether the company would run out of banking headroom is understood to have been behind a delay by VT Group to up its bid during takeover talks earlier this year, which eventually collapsed when Babcock made a swoop for VT.