Mouchel Group Plc (MCHL) declined to a record low after the U.K. road maintenance company said that all alternatives to achieve sustainable capital financing will result in “limited value” for investors.
Mouchel plunged 34 percent to close at 3.8 pence in London, the lowest price since the company’s June 2002 initial public offering, after falling as much as 40 percent during the trading day. The decline pushed the stock to a 30 percent drop this year, valuing the company at 4.34 million pounds ($6.73 million).
The “review of options to provide Mouchel with a long-term sustainable capital structure is progressing, with a balance sheet restructuring due to be announced prior to the year end on July 31,” Woking, England-based Mouchel said today in a statement.
Mouchel’s comment “emphasizes to investors that the existing equity has little or no value,” Christopher Bamber, an analyst with Peel Hunt with a sell rating on the stock, said in a phone interview. “They have to raise fresh equity or have a debt-to-equity swap with the banks. The business has got too much debt. Their order book keeps shrinking.”
Costs related to an operational reorganization and an anticipated financial restructuring affect this year’s performance, Mouchel said. The company, which is widening its cost-reduction target to 21 million pounds from 18 million pounds, has net debt of 104.1 million pounds.
“The environment remains challenging,” Chief Executive Officer Grant Rumbles said in the statement. With the exception of the Middle East and management consulting operations, underlying business is performing broadly in line with management expectations, Mouchel said.
Mouchel increased its credit lines to 180 million pounds on Nov. 30 and was granted amendments by its lenders to stave off a covenant breach. Mouchel described the loan as “relatively expensive.”
The net loss for the six months ended Jan. 31 widened to 12.6 million pounds from 1.3 million pounds a year earlier, while revenue was unchanged at 270 million pounds, the company said on March 29.
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