Account gaffe sees Mouchel chief quit

Mouchel overestimated profits from one of its contracts and said profits would be further hit by a similar amount after it increased the amount of money set aside to cover shortfalls from other contracts.

Shares in the company, which carries out contracting and consulting for councils and government agencies, fell 40 per cent.

Chief executive Richard Cuthbert has stepped down and his role will be taken by chairman Bo Lerenius until a replacement is found.

The company’s share price has been decimated since the start of 2010 as its profit margins and order book have been squeezed by the Government’s public sector spending cuts and intense competition.

The company’s value yesterday dropped to about £21m, significantly lower than the bids it received from rival support services firms Costain and Interserve, both of which it rebuffed.

The offers were initially worth in excess of £170m, but were subsequently reduced when the extent of trading problems became clear.

John Lawson, an analyst at Investec Securities, said he is likely to reduce his profits forecast for the year to July 31 to £5m from £14.3m.

This compares to profits of £30.5m in the previous year.

Mouchel handles projects for local authorities in Milton Keynes, Middlesbrough and Bath & North East Somerset.