MCHL Mouchel Group

TIDMMCHL

RNS Number : 1711A

Mouchel Group plc

27 January 2011

27 January 2011

Mouchel Group plc

New banking facilities agreed to 2014

Mouchel Group plc ("Mouchel", the "Company" or the "Group"), one of the leading consulting and business services organisations in the UK, is pleased to announce the successful refinancing of its principal banking facilities.

Refinancing

Last October we announced that we had embarked on a process to refinance our principal banking facilities and that we expected to complete that exercise by the time of our Interim Results at the end of March 2011. With the support of the Group's relationship banks (Barclays, Lloyds Banking Group and RBS), we have now signed new medium-term facilities well ahead of the original timetable.

Richard Cuthbert, Chief Executive of Mouchel, commented:

"This is an important turning point for Mouchel. It provides the Group with stability and ensures that we can continue to compete successfully in our chosen markets.

"Although we are still operating in challenging conditions, the fundamentals of our business and the medium to long-term opportunities for the Group remain strong. Mouchel came to the Stock Market on the back of the major public service reforms of the eighties and nineties; the present Government's policies will offer a second major catalyst to growth for Mouchel. With our new facilities and our leading market positions in our core businesses of local government outsourcing, public sector consulting, highways and water, we look forward with renewed confidence to implementing our strategy, working with organisations across the UK public sector - and in selected overseas markets - to improve the quality and efficiency of public services."

The key features of the agreement are:

o Total facilities of GBP170m extending to 31 March 2014;

o Interest margin on the facility of 3.1% - 4.0% dependent on ratios;

o Two repayments each of GBP7.5m on 31 July 2012 and 31 July 2013;

o In the event that an additional voluntary repayment of GBP30m has not been made before 31 May 2012, an increase in margin of 2% and the issue of warrants at that time over 5% of the issued share capital of the Company at an issue price of the lower of 75p per share and 80% of the share price at that time; and

o A restriction on resuming dividend payments until the voluntary repayment of GBP30m has been made.

Unamortised arrangement fees from the previous facilities will be charged as an exceptional item in the 2010-11 half year results.

Business update

As announced on 6 December 2010, we have reviewed our business and are confident that our focused strategy, established market position and our leading role in transforming essential services and sustaining vital infrastructure underpins the medium and longer term outlook. In an environment where all of our clients are facing the challenge of delivering higher quality services more efficiently, it is clear that our skills will be increasingly in demand.

We retain a relentless focus on driving operational efficiencies. We have already achieved a full-year cost savings target of GBP25m, and are continuing with further cost reduction programmes. We continue to focus on opportunities to improve our cash generation and working capital, and we expect to reduce debt progressively over time as a result of new financial processes and systems.

In the Middle East, Nakheel has appointed specialist claims consultants and we have now completed the re-submission of all documentation to support our claim for the recovery of outstanding payments (which amount to nearly GBP20m). Agreed compensation would be in the form of cash (40%) and "sukuk" bonds (60%).

We also announced on 6 December 2010 that we had reviewed the future shape and organisation of the business, and had commenced preparatory work on the potential sale of non-core businesses. The sales will also help meet the voluntary repayment of GBP30m. We have made good progress since then, and have appointed Hawkpoint to advise on the sale of several non-core businesses.

The Group has made an excellent start to developing its business in Australasia, having secured contract wins or preferred bidder status for three major highway maintenance contracts with Main Roads, Western Australia in joint venture with Downer, a leading construction company in Australia and New Zealand. We are actively looking at options to strengthen the joint venture and our broader relationship with Downer.

Our ten-year Incremental Partnership Contract with Bournemouth Borough Council commenced on 1 December and has begun well. Encouragingly we have seen an increase in the number of local authorities preparing for service transformation, outsourcing and partnership with the private sector. One of the first of these to come to market is Peterborough City Council, where we have recently been short-listed to bid for a major bundled service contract.

Corporate activity

We announced, on 6 December 2010, that we had received approaches which could result in an offer being made for the Company for the purposes of the City Code on Takeovers and Mergers.

Costain's interest has been made public, and shareholders will be aware that we rejected its early approaches because they significantly undervalued the Company and its prospects.

We are actively reviewing all of the approaches that we have received and our other options. Our priority remains enhancing shareholder value and we continue to urge shareholders to take no action.

Outlook

Our expectations for the year to July 2011 remain unchanged. In October 2010, we noted that trading in the current financial year had started slowly, as public sector clients continued to reduce or delay spending decisions. As previously indicated, our performance will be weighted more towards the second half than in previous years. We remain cautious about the short term trends in some of our markets and will therefore continue to take appropriate action to ensure that the Group is well placed to adapt to future market conditions.

At the end of January, the Group's order book is expected to be circa GBP1.7b with our pipeline of tenders and near term opportunities at around GBP2.0b. This visibility underpins our confidence in the medium and long-term prospects for the Group.

For further information please contact:

Mouchel Group plc

Richard Cuthbert, Chief Executive ) 01483 731731

David Tilston, Group Finance Director )

Finsbury

Faeth Birch ) 020 7251 3801

Charles Watenphul )

There will be a presentation today for analysts at 9:00am. Please call Sara Merrilees at Finsbury on 0207 251 3801 for the details.

Dates for the diary:

Mouchel will hold its Annual General Meeting in London at 2:00pm on Monday 31 January 2011.

The Company announces its Half Year Results for the six months to 31 January 2011 on 31 March 2011.

Note to editors:

The financial covenants applying to the new facility are that:

(a) the ratio of net debt (including bonds) to EBITDA may not exceed 3.55, reducing to 1.54 over the life of the facility;

(b) the ratio of EBITDA to net interest payable should not fall below 3.02, rising to 5.52 by the end of the facility; and

(c) debt service coverage (the ratio of free cash flow to interest and principal repayments) should exceed 1 times.

Disclosure requirements of the Takeover Code (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.

This information is provided by RNS

The company news service from the London Stock Exchange

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