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Mitie writes down £50m and cuts 160 job roles

Mitie has announced in an update for the financial year ended on 31st March 2017 it has cut 160 jobs in the first wave of a new cost reduction programme and expects to write-down its balance sheet by up to £50 million.

The update follows an “Accounting Review” of the support services policies and balance sheet undertaken by the Company and and one of the Big Four auditors, KPMG.

As announced in its January trading update, Mitie has since reviewed all major balance sheet items to provide confidence that all relevant accounting standards are appropriately reflected in its financial reporting.  The work was complemented by KPMG’s review, which covered certain aspects of the material balances of accrued income, mobilisation costs, percentage of completion accounting and the recoverability of trade receivables, as well as the carrying value of certain other assets.

KPMG confirmed that customer contract related methodologies and policies used by Mitie comply with all relevant accounting standards. However it stated that Mitie’s application of percentage of completion accounting and costs of contract mobilisation is “less conservative, albeit still justifiable, than others in the market”.

In response to the findings, and in addition to the £14 million of one-off charges identified in the January trading update, the Board stated it “expects to write down its balance sheet by between £40-£50 million”.

Of this total, £6 million relates to provisions which Mitie expects to result in cash outflows in FY’18, with the majority being non-cash write-downs of trading assets, and according to the company  will have “no impact on the future profitability of the business”.

The costs of change for the business have increased by £5 million to £15 million since January as further jobs have been axed.

Phil Bentley, CEO said:“FY’17 has undoubtedly been a challenging year but Mitie remains a strong and successful business, and is continuing to deliver for our customers. 

“Whilst these accounting adjustments in FY’17 affect our reported profits, they do not affect the underlying strength of our business.

Since my appointment as CEO in December, we have worked hard to build a new “Connected Workspace” strategy, with clear deliverables and measurements for Customers, Costs, People and Technology.  Mitie has a well-diversified portfolio of high quality customers and an outstanding range of capabilities.  We have appointed a new Executive Leadership Team with a new way of working and we are confident the business will generate significant shareholder returns over the forthcoming years.” 

Full year results for the twelve months ending 31st March 2017 and an update on Mitie’s strategy will be announced on 12 June 2017.

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