Mouchel faces £130m hit to order book

The outsourcing firm said it is in talks with Rochdale Council over making an 'amicable exit' from a regeneration partnership but it would have a negligible impact on cashflow and profits.

In an interim management statement to the London Stock Exchange the company said the mutually agreed end of the partnership would remove £130m from the order book.

Mouchel also reported failure to land a predicted £400m contract with West Sussex Council. In total the order book fell from £2.2bn to £1.6bn.

However, the firm, which is urgently restructuring its debt and has replaced its chief executive this year, did win £79m of work since July.

The company said in the statement: "Our expectations for the year to July 2012 remain unchanged. The economic environment continues to put pressure on margins across our markets, as clients face cutbacks in spending. We have however, continued to win contracts and the actions to right-size the business are well under way, including plans to restructure the balance sheet of the group within the first half of 2012 and return the Group to growth."

The group said net bank borrowings were £108m at the end of November compared to £109m at the same time last year.