Interim Management Statement

RNS Number : 9235J
Mouchel Group plc
11 December 2008

11 December 2008
Mouchel Group plc
Interim Management Statement

Mouchel Group plc, the consulting and business services group, issues the following Interim Management Statement covering the period
from the beginning of the financial year, 1 August 2008, to date. The company holds its Annual General Meeting in London today at 10.30
a.m.

Trading performance

We have made good progress during the period and we continue to enjoy an exceptionally strong order book and a healthy bidding pipeline.
Our performance in the year to date means that we are on track to meet our expectations.

The integration of HBS and Hedra is complete. We have experienced excellent staff retention from both of these acquisitions and are
benefiting from the additional capability, including the strengthening of our top team.

We are continuing to recruit new people both at senior level, and elsewhere in the organisation, to strengthen our business development
capability and broader skills.

Government Services
The business transformation and change management skills which we secured through the acquisition of Hedra are now being used to good
effect in developing and growing the relationships with our existing local government clients. This has already resulted in commissions to
support major cost reduction and transformation programmes in our partnerships with Lincolnshire, Middlesbrough and Oldham councils.

Our Management Consulting business within Government Services, which now includes Hedra, has also secured several new commissions with
other government clients. These include specification of knowledge management requirements for the Abu Dhabi government, organisational
design for the UK Skills Funding Agency, review of operational and service improvement opportunities for Thames Water, procurement advice
for the National Police Improvement Agency and further project management support on the National Healthy Schools programme. Potential
future opportunities include support with the Identity and Passport service identity cards programme and advice on setting up an electricity
regulator in the United Arab Emirates (UAE).

We are close to securing a further four year extension with Lincolnshire County Council to take effect from 2011, which is in addition
to the one year extension already awarded; and discussions with Middlesbrough Borough Council around a five year extension also from 2011
are proceeding well. In addition, we are bidding a number of bundled service opportunities and outsourcing contracts.

We have now reached financial close on the Hackney BSF contract where, with our partner Babcock, we have been preferred bidder for some
months. We are continuing to monitor new contracts in the BSF programme, but in view of BSF's lengthy and costly procurement model, and the
fact that we did not proceed beyond the last two in Southwark, we are now reviewing our approach to this market.

Regulated Industries
The market place for our services in this area remains largely buoyant. Notwithstanding the current economic conditions, the indications
are that there will still be an increase in expenditure under AMP5 relative to earlier regulatory periods. We have already commenced
significant bidding activity under AMP5.

We have won and successfully commissioned the leakage detection commission for all eight zones in Thames Water's North East and North
West areas. The contract is expected to run until 2010, with the potential to extend it by a further five years.

Rail has benefited during the period from the award last year of the professional services framework and property help desk contracts
with Network Rail. We are still working on the Colchester to Clacton resignalling support contract for Network Rail. However, progress
remains slow, reinforcing our decision to reposition the overall rail business towards design, asset management and programme management
activities.

We have continued to work extensively with London Underground where we are supporting CBS Outdoor with the completion of the roll out of
its digital advertising media programme. Our work to design innovative schemes to cool London Underground station platforms, as well as its
trains, has also continued during the period.

Our international operations form a relatively small proportion of our total activities and, apart from Ireland, are focused on the UAE
and Kuwait. In the UAE, we have continued to work on major infrastructure design projects and developments, particularly in Dubai. This is a
rapidly changing environment and we have recently seen some scaling back in activity there, particularly in the Dubai Waterfront
development. We are increasing our activities in Abu Dhabi where the current economic difficulties are expected to have less of an impact.

Highways
Over the last 10-15 years, our strategy in Highways has been to move our business progressively from design of new infrastructure, to
maintenance of existing assets and to the application of technology to optimise highway capacity. There are good prospects for the Group in
Highways, with no evidence of budget tightening at the Highways Agency (HA), one of our principal clients. Much of the HA's capital spend
will be on the 'Managed Motorways' programme which includes the Active Traffic Management (ATM) or hard shoulder running activities. We are
particularly well positioned in this area, given our pioneering role on the introduction of ATM on the M42, and we are currently engaged on
the introduction of the next phase of ATM on other parts of the Birmingham 'motorway box'. We are also currently working on feasibility
studies for Managed Motorways, for which the Government has recently confirmed significant funding for the implementation going forward.
Other technology related opportunities include the TechMAC contracts, where we are awaiting the outcome of tenders for the West Midlands and North East areas.

We successfully commissioned the HA Super Agency contract in Area 3 (South of England) during the period. Area 3 is the second largest
HA vertically integrated management contract in the country and we now expect that the volume of work going through the contract will be
greater than that assumed when we tendered it.

We learnt during the period that we were not successful with the tenders in Area 7 (East Midlands) and Area 9 (West Midlands). We are
still in contention for Area 12 (Yorkshire and North Lincolnshire) but are more hopeful of securing one of either Area 13 (Cumbria), where
we are the current incumbent with Amey, or Area 14 (North Yorkshire, Durham and Northumberland). The timetable for tendering Areas 13 and 14
has been brought forward with shortlisting expected early in the New Year followed by the issue of the tender documents in the Spring.

In the local authority area, we are pursuing vertically integrated maintenance contracts with Enterprise as well as looking at
partnering for several forthcoming local authority road maintenance PFI opportunities. Our parking management contract in Hillingdon is
going well and we are pursuing a number of other parking management opportunities.

Order book and pipeline

The Group's prospects are underpinned by the continuing strong order book and bidding pipeline, which provide excellent visibility of
future earnings. They currently stand at �2.1 billion and �2.0 billion respectively, compared with an order book of �2.1 billion and a
bidding pipeline of �2.2 billion at the last year end. The pipeline has been sustained through the inclusion of new bundled service
opportunities and should be increased further early next year by the inclusion of other similar opportunities and the next tranche of HA
Super Agency contracts.

Financial position

The Group's financial position is strong. We have in place bank facilities of �185 million, of which �125 million expires in August 2012
and �60 million in September 2009.

Outlook

Mouchel helps to improve day-to-day life for millions of people. We help to transform essential public services and sustain vital
infrastructure. Our strategy is to secure long-term managed service and outsourcing contracts, mainly with clients in the UK public sector
and industries regulated by government. Most clients in these markets are under pressure to deliver services more effectively and reduce
costs.

However, the resilience of our business model means that we continue to be less affected by the recent economic conditions in the UK and
elsewhere. We are working in markets which generally still present us with opportunities and have very little exposure to the UK commercial
property market. In addition, we are continuing to monitor prospects to further develop and grow the business as and when they arise, for
example in sectors such as IT, energy, education and social care.

The outlook for the Group remains promising and we are confident about our future prospects.

For further information please contact:

Mouchel Group plc
Richard Cuthbert, Chief Executive ) 01932 337122
Kevin Young, Group Finance Director )

Finsbury
Mike Smith ) 020 7251 3801
Charles Watenphul )

This information is provided by RNS
The company news service from the London Stock Exchange

END

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