Mountfield Group plc Strategic Review (3072L)
25 April 2015 - 12:40AM
UK Regulatory
TIDMMOGP
RNS Number : 3072L
Mountfield Group plc
24 April 2015
Mountfield Group Plc
("Mountfield" or the "Group")
Strategic Review
Further to the announcement on 23 December 2014, Mountfield has
completed a Strategic Review following the downturn in the Group's
performance in 2014, with the intention of returning it to more
satisfactory level of profitability in a short period of time ("the
Review").
The Review was undertaken by Adrian Sainsbury, Mountfield's
non-executive director and Conor O'Mahony, the Group's Chief
Financial Officer. It looked at all operational and financial
aspects of both Connaught Access Flooring ("CAF") and Mountfield
Building Group Limited ("MBG") and its conclusions and
recommendations have been accepted and agreed by the Group's
Board.
The principal conclusion of the Review was that MBG's had become
loss making in 2014 because it had moved away from its original
core business of construction work for which it contracted directly
with its client. The Review team, having reviewed the business
infrastructure have decided that MBG should close down the division
that concentrated on large, high-risk builders works packages where
work was undertaken on a lump-sum, fixed-price basis. The two
remaining divisions (in which MBG has worked directly with the
client) have proven to be profit making and in addition to
continuing to undertake them MBG will integrate into its business
those projects which the Board considers of a low risk nature.
The Review noted that MBG's margins on the builders works
packages were at best significantly reduced and at worst were
negative. These contracts (and in particular three of them that
were undertaken in 2014) have led to MBG becoming unprofitable.
The Review team also concluded that MBG's operating costs in MBG
were excessive. This resulted in part from the nature of the work
previously undertaken and a reduction would follow from a cessation
of that work type, but opportunities to make cuts were highlighted
by the Review in other parts of the MBG. The savings that have been
highlighted, will include reduction in headcount and of office
space and will come into effect over the next 2-3 months. The
annual resulting cost savings are expected to be in the region of
around GBP400,000.
The Board expects that the significant changes that are
currently being made and that will continue to be implemented, will
deliver shareholder value in 2015. The buoyant market conditions
that were experienced in late 2014 have continued to date and the
Board views the future very positively. As a result of the recent
unprofitability of MBG the Board expects that the Group will
report, at best, a break-even performance in 2014 and a return to
profitability in 2015.
Connaught Access Flooring ("CAF") continues to trade well and is
experiencing a strong order book.
The Board believes that as a result of the implementation of the
recommendations of the Strategic Review, the Group will be
substantially stronger than it was in 2014. The focus on
core-contracted work at MBG under a substantially reduced
cost-base, should greatly reduce any future contract risk.
Management Changes
Having led the Group for six and a half years, Graham Read will
pass the role of Group CEO to Andy Collins, CEO of CAF.
The Board expressed its thanks to Graham (who will continue as
CEO of MBG and a Director of the Group) for his leadership of the
Group, particularly during the difficult years of the
recession.
Balance Sheet Restructured
Finally, the Review highlighted the way in which the Group's
balance sheet was weak as a result of the existence on it of the
Loan Notes that were issued to Graham and Janet Read and to Andy
Collins at the time of Admission. The Board have agreed with the
holders of the Loan Notes that they should be cancelled with the
net result that approximately GBP3m of debt will be written off.
This will put the Group in a far stronger position going forward
and give it a much cleaner balance sheet that will help it achieve
its ambition of building a sustainable, diversified construction
business.
Contacts:
Mountfield Group PLC 01268 561 082
Andy Collins, Chief
Executive Officer
WH Ireland Limited 0207 220 1666
Paul Shackleton
James Bavister
This information is provided by RNS
The company news service from the London Stock Exchange
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