Mouchel Share Discussion Threads

[pikey01] 02/4/2012 12:12

Don't be silly. taxislags, John Craven and whoppy will be along in a minute to tell us how great it all is, and how we don't understand... ..and how clever they are for filtering people who, it turns out, were actually correct.

ROFLMAO

[rayteuptetash] 02/4/2012 12:00

If it was Friday Pikey, you would have been bang on the money again.

[wooster4] 02/4/2012 11:48

ray - do you have an interest here or are you simply giving up your hard earned time to provide us with your wisdom??

[pikey01] 02/4/2012 08:14

Ray,

Reading between the lines, the CarillionMouchel bid for Sheffield was obviously completely stuffed due to the spectacularly bad mouchel numbers,(something I wrote about on LSE 12 months ago) so the only way the other shortlisted company wouldn't win by default was for Carillion to effectively bid this alone and let mouchel subcontract some bits of it where they do have the expertise Carillion lack. No doubt some on here will see this as some sort of "win" for mouchel (!!), but the reality is obvious to those with clear-glass lenses... Sheffield is announced soon anyway, so guess well see soon enough.

As for equity raising I would suspect "massive dilution" to mean exactly that, possibly looked at (when modelling this) 8:1, target share price 11-12p. Raises enough money to clear all the debt, doesn't completely decimate existing holders who bought @ around 20p or less.

IMO. DYOR. Apols if my maths is wrong - it's early.

PS: That's what they may have modelled! The reality of dumping that many shares onto the market if they do it may well see this drop substantially.

[whoppy] 01/4/2012 20:16

I'm not really sure the banks have the appetite to take on and become new owners of Mouchel through a debt for equity swap right now. Just what are they going to do with all those shares given the current share price and setiment.

Having warrants exercisable in 3 years will enable banks to sell what will be a stronger company into a market with a better sentiment, and if Mouchels are doing really well, keep some of the shares and make some profit.

Meanwhile a credit facility can be extended that will provide operating cashflow enabling the company to win and operate big contracts.

One thing is key and that is a higher share price will be needed for any of the options that are being considered to work, or the value of the company without support, will be zero.

May hopefully have some good news tomorrow.

[magpie99] 01/4/2012 15:52

trouble is warrants do not help the company win contracts NOW.

Will Mr Client be happy buying services from Mouchel based on warrants that may/may not be excercised 3 years hence?

Perhaps if Mouchel win some big contracts NOW, then banks may be reassured, if not debt for equity looks a certainty.

[htrocka] 01/4/2012 14:20

WYG have had two restructirings to date...the final one was a 'back us or we'll not survive' ultimatum...hence MCHL is NOT a WYG sceanrio...plus they issued 'B' and 'C' shares...and locked every one in.....I can go for that.

[rayteuptetash] 31/3/2012 19:57

Pikey

I would not say the company is dead in the water just yet.....

Just the shareholders....

And your right, those numbers are a disgrace.

Do you think there will be any chance of warrants? Renegotiation on debt will not be for our benefit thats for sure. I have asked you over and over. Did you short this? And did you sell....or was it just not worth it for you.

That WYG senario is looking very similar now isn't it!? Look at the size of the dilution there. Scary

[htrocka] 31/3/2012 19:24

pug 9with refo to Ramco)...went from 32p to 16p....then ..eventually onto 80p....In the 'good old days'...briefly hit 12 GBP...recommended by 'The Telegraph'...at 300p...it. like Mouchel, has had an interesting background.

with ref to MCHL's borrowing....they're looking for an increase to 225m GBP..,(they'll have to do some very serious 'horse trading' to raise that amount of cash.....and ps...'yes' the major shareholders will have to sanction it).....Mouchel talk interms of 'Significant dilution'....but the bottom line is that it's not their decision...what ever they do will have to get passed the major shareholder,hence that's why I believe the warrant route is looking favourite.

[pug151] 31/3/2012 18:24

totally agree with your analysis whoppy

[whoppy] 31/3/2012 17:47

Preserving the company is key to repaying the debt. The debt could convert to new shares at an exercise price (Say 33p)..on £100M debt that will be 300M new shares. With the banks being supportive and the strategy being implemented to create value and get the company moving and winning new work, the exercise of theses warrants in 2-3 years time could pay back the debt with interest.. It becomes self fulfilling, and would be achievable as the business is good and it would be seen as a real vote of confidence.

Obviously if the banks don't think 33p is achievable in 2-3 years they will want a lower exercise price (say 10p) but they will shoot themselves in the foot as this will mean 1Bn shares for the debt and the share price will struggle to go anywhere with that many shares hitting the market in 2-3 years time as the business will not be able to grow enough to be able to absorb that kind of dilution.

So, provided the management can demonstrate they can grow the business enough for the banks to get their loan repaid, taking warrants is the only realistic way. If they can then the banks would be looking at making some money on this if they are patient.

Alternatively if they want their money now and insist on the debt being paid then they would have to sell the business, as on current valuations there is just not enough equity to issue to pay the debt.

Interestingly, dividing the business into two, Infrastructure and Management, means it is more likely for a takeover as it will attract two types of bidders. It could also mean each part of the business shares the debt which may make offers more likely. Strategically Mouchel is worth a lot more to someone that compliments it's business and with the restructuring it's just got a whole lot more attractive..imo.

Lot's of ways to skin a cat, and really only made possible because it is clear the company does have a future.

[pug151] 31/3/2012 12:35

htrocka
thanks for the example
what was the short term effet on the share price of issuing the warrants?

[htrocka] 31/3/2012 12:26

I personally believe the next six months will see them off the deck .,...With respect to potential significant dilution levels...I remember Ramco , as it was then, capitalised at 10m GBP and had debts of 63m GBP and also rejected a takeover...the banks were supportive...and loaned them a couple of million quid in exchange for warrants at 32p...execiseable upto three years down the line..they successfully exercised them.(Ramco sold off the asset that caused the problem)

I noticed in the AGM statement they issued the 'increase in borrowing' clause...along with the bog standard 'power to repurchase own shares' clause....they're leaving their options open.

I doubt if wiping out the top five major shareholder will aid G.Rumbles initiative to raise more cash via a dilution...the word 'barge pole' comes to mind.




from the website

Strategy
Mouchel is an infrastructure and business services group that provides design, managerial, engineering and operational services to support modern society.
Our strategic review has been completed and a new business plan has been agreed. Four key strategic actions have been identified to deliver sustainable growth and improved profitability:

1) Simplify organisational and operational model
We will reduce our organisational structure from four divisions, comprising 14 operating groups and three business development functions, to two divisions, which will focus on our core markets: Mouchel Infrastructure Services and Mouchel Business Services. The new streamlined structure will help to reduce bureaucracy and delegate responsibility and authority more effectively. It will provide tighter control and reduce support costs.

Mouchel Infrastructure Services will comprise our existing Highways and Regulated Industries divisions (including our operations in the Middle East). Mouchel Business Services will comprise our existing Government Business Services (GBS) and Management Consulting divisions.

The two divisions will have their own management teams and boards, which will take responsibility to fulfill the financial targets. This new structure allows corporate head office costs to be reduced accordingly. We will run our business from a smaller property footprint, which currently is too large.

The revised structure will improve client focus and technical capabilities. This focus will deliver operational excellence and help Mouchel to improve win rates and margins.

2) Maintain and grow in markets where Mouchel is leading and focus on our core strengths
In Mouchel Infrastructure Services, we will grow the Highways business in the UK, Australia and the Middle East.

In the UK, we will maintain our current position with our key client the Highways Agency (HA) and growth will be provided from the local authority highways market (currently only 50% of this market is outsourced).

Our successful partnership in Australia has secured new work and won awards for client service and business excellence. We have also identified significant prospects for growth in the Middle East, where governments have committed to a spend of £4bn for the development of road infrastructure.

Our water consulting business will be incorporated within Mouchel Infrastructure Services and we will look to grow this by positioning for the UK water industry's AMP6 cycle for 2015-20 (where spend has increased more than 20% in the last three cycles) and in the Middle East.

In Mouchel Business Services, our local government outsourcing business will focus on retaining and growing existing contracts and improving profitability. We will expand the business into adjacent councils to support the partnerships that we have created. We will integrate our management consulting business within our local government outsourcing business to provide innovation and growth.

In the short term, we will focus on our existing clients. Between three and eight new bundled contracts come to market each year and if only the contracts currently being procured are let, the market will grow by at least 5% per annum over the next six years. Mouchel is not currently pre-qualified for any new large BPO contracts. Due to our financial position, we are unlikely to successfully compete and therefore we will focus on improving our bid processes and target selection and be ready to go to market as, and when, our balance sheet has been restructured.

We will also create a new property business unit where we will focus our broad expertise and use this new unit as a foundation for growth.

3) Reduce overhead costs
Our existing structure was developed for a much larger business than we are today and there are opportunities to reduce the size of our corporate centre without damaging our business or affecting the services we deliver. We will achieve savings of circa £18m from overheads, which will be achieved in a large part by closing 13 properties. We plan to implement the majority of the savings by the end of September 2012 and the remainder by July 2014. We will also achieve cost savings by improving our financial systems and processes and devolving central functions to the two new divisions.

4) Improve contract win rates and profitability
As part of our strategic review we have cleansed our pipeline of future revenue opportunities, which has seen a reduction by £670m to £1,507m. A more focused pipeline helps us to concentrate on our most profitable opportunities.

We will improve win rates by implementing new processes and targeting our people and resources at key opportunities. We will also bring in additional people with proven track records to improve our bid performance where necessary.

We will improve contract profitability by delivering services to our clients more efficiently and sharing best practices, new technology and lean processes. We will also appoint a strategic IT partner to support us in this aim..

[pug151] 31/3/2012 11:44

RTTT
1)how many shares at lets say 7p need to be created to significantly reduce debt?
2)Is this level of dilution likely?

[rayteuptetash] 31/3/2012 10:57

Im just absolutely amazed the share price has held up this well to date.

For all intense and purposes it should be around 5p by now

Pug, your not Whoppy in disguise are you?

[pug151] 31/3/2012 10:23

with the profit warnings and the massive share price decline who expected anything else from the interims