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Mitie’s profits continue to fall

PrintTroubled outsourcing business, Mitie, has issued a second profit warning as its reports an operating loss of £100 million in its half-year financial results.

The company blames its losses on the impact of changing market conditions as “clients adjust to rising labour costs and economic uncertainty”. Operating figures for the same time last year produced a profit of £45 million.

As a result, Mitie has stated it is to withdraw from the domiciliary healthcare market and is putting the group’s domiciliary healthcare business “under strategic review”. The board says it has “changed its long-term view” of this market and cited “downward pressure on homecare charge rates and a reduction in care volumes” as the main contributors to its healthcare losses. Mitie will however, continue to fulfil all obligations in its healthcare business, but says it will no longer be investing in new areas of this market.

Improved performance is expected in the second half of the year due to enhanced revenue visibility from new contract awards and retentions, momentum in levels of project work and the anticipated incremental fiscal year second half benefits from restructuring programmes of £10 million compared to the first half of the year.

Mitie has reported it has secured 94 per cent of budgeted revenue for 2016/17, along with 65 per cent of forecast revenue secured for 2107/18. However, despite this progress, due to ongoing market uncertainties, it expects its underlying earnings for FY17 to be below management’s previous expectations.

As part of the board’s long-term succession plans, Ruby-McGregor Smith will be stepping down from her role as CEO on 12 December. She will be replaced by former British Gas boss, Phil Bentley, who joined the company as a director on 1 November 2016.

Speaking about the financial results, McGregor-Smith, said:

“The first half of this year has been difficult but we are not alone in facing significant macroeconomic challenges. The steps we have taken to counter these impacts include the restructuring of both frontline and support functions across FM and the decision to withdraw from the domiciliary care market. Second half performance is expected to improve with our new operating model as we adapt to market conditions.”

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