(Updates with closing share price.)
Oct. 6 (Bloomberg) -- Mouchel Group Plc plunged the most in more than nine years after saying an accounting error wiped out 4.3 million pounds ($6.6 million) of profit from a contract and that Chief Executive Officer Richard Cuthbert resigned.
Mouchel, which provides highway maintenance services, plummeted 34 percent, the most since it first sold shares in 2002. The shares closed at 20.5 pence at 4:30 p.m. in London trading, giving the company a market value of 23 million pounds.
Cuthbert tendered his resignation with immediate effect after the discovery of “an actuarial error” that meant full- year profit would be hurt by a corresponding amount to the reduced one-off gain on the contract, the company said in a Regulatory News Service statement today.
In June, the company said that a “significant one-off gain” on a long-term contract offset lower than anticipated profitability on other contracts. Mouchel has seen its order book drop as the U.K. coalition government pushes through public spending cuts.
“The fact that there was no positive news in today’s statement can only lead us to believe there isn’t much,” Joe Brent, an analyst at Liberium Capital, wrote in a note. “It is difficult to see how that would not result in a breach” of at least one bank loan covenant, he wrote.
The departing CEO “had some strong relationships with customers and customer and personnel retention may become even more of an issue,” Brent added.
He cut his full-year earnings per share estimate 66 percent to 3.2 pence, and provisionally reduced the estimate for 2012 by 35 percent to 6.5 pence.
Mouchel declined to comment when contacted by telephone.
--With assistance from Deborah Hyde in London. Editors: Chris Peterson, Tim Farrand
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