Mitie has revealed plans to reduce headcount by the end of the current financial year, and is currently looking at the sale of its Property Management business.
The outsourcing company announced its intentions as part of the Group’s wide-cost transformation process – Project Helix- in its pre-close trading statement for the half-year ended 30 September 2017.
Project Helix aims to see a reduction in Group operating costs on an annualised basis of £40 million by FY2020. However, Mitie confirmed that the estimated implementation costs to be incurred by the programme in the current financial year currently stands at £24 million against the previous estimate of £15 million.
As part of the Group’s work-flow transformation, Mitie stated “a simplification of the spans and layers of management within our Engineering and Cleaning divisions has now commenced – ahead of schedule – to improve management accountability and visibility of contract profitability”.
This along with other aspects of the transformation programme are expected to result in headcount reduction of approximately 480 by March 2018 year end, although there has been no disclosure where the cuts will be made.
As part of the wider strategic review of the Group’s operations, Mitie is examining options for its Property Management business, and has instructed Evercore Partners International LLP to explore a potential sale of the business, having received expressions of interest from third parties.
The Group’s order book is up three per cent against 31 March 2017, at £6.7 billion. This includes new contract awards from a multi-national grocery retailer, an e-commerce and cloud computing company, and a major homewares and household goods retailer. This has been in part been off-set by the loss of a top 20 contract which was not due for retendering until 2019. This lost contract will result in a one-off non-cash write-off of £6 million. Mitie anticipates receipt of a termination payment of £2 million.
Revenue for the Group year-to-date has been better than anticipated and is expected to be c. £1.1 billion for the half-year, four per cent ahead of the FY2017 comparable period. Mitie expects this revenue trend to continue for the full year.
Mitie stated it is to continue to invest with discipline in its core capabilities and infrastructure to deliver on its strategy, and confirmed investing in technology and connected workspace capabilities remained ahead of plan, enhancing customer and relationship management programme is on track, along with its finance, HR, IT, Group structure reviews and cost reduction programmes, however improving employee engagement and driving productivity is currently behind plan.
Peter Dickinson, Acting CEO of Mitie, commented: “Overall we are making steady progress in the transformation of Mitie. Top line growth in the first six months has been encouraging, our dedicated focus on putting customers at the heart of our business and identifying cost savings is beginning to deliver and we are investing at pace in talent, capabilities and systems. Transforming a large, diverse business such as Mitie is neither linear nor without challenges, but the programme remains on track. I expect to see the positive impact of our endeavours as we move into the second half of the year.”
The Board has recently carried out a competitive tender process for the provision of audit services and, as a result, Deloitte LLP has resigned as Mitie’s auditor with effect from 19 September 2017, and the Board has appointed BDO LLP to fill the casual vacancy until Mitie’s next Annual General Meeting, in 2018, when shareholders will have the opportunity to vote on their appointment.
BDO LLP will immediately review the financials for the half-year, 30 September 2017, and audit the full year ended 31 March 2018.
Last month Mitie announced it was being investigated by the Financial Conduct Authority into the timing of a profit warning issued by the Group in September of last year and the preparation and content of its company accounts for financial year ending 31 March 2016.