Mitie Group revenue and profit drops as outsourcing firm begins exit from healthcare market
Outsourcing firm Mitie Group swung to a loss in the six months to 30 September, with a 40 per cent drop in operating profit.
The figures
Revenue fell 2.6 per cent in the first half, from £1.123bn to £1.093bn.
Meanwhile, operating profit before other items dropped 40 per cent to £35.4m from £58.1m. The group said this excludes a £107.1m impairment of goodwill, a £10.1m write off of acquisition related intangible assets, £6m in restructuring costs and a £4.9m acquisition related item.
The group swung to a pre-tax loss of £100.4m from profit of £45.1m this time last year.
Mitie is cutting its dividend from 5.4p per share to 4p.
Shares in the group dropped 20 per cent at the open today.
Why it's interesting
The group said its performance in the first half of the year had been "impacted by changing market conditions as clients adjust to rising labour costs and economic uncertainty".
According to Mitie, weak UK business confidence has affected client investment plans, with the result that reductions in higher margin project work and discretionary spend have reduced profits in its facilities management segment.
Earlier this year, the group warned that results for the first half would be decidedly lacklustre due to a combination of "lower UK growth rates, changes to labour legislation and further public sector budget constraints, and uncertainty both pre and post the EU referendum".
The company also noted that "downward pressure on homecare charge rates and a reduction in care volumes has resulted in increased healthcare losses". The group is withdrawing from the healthcare market.
What Mitie said
"The first half of this year has been difficult but we are not alone in facing significant macroeconomic challenges," said chief executive Ruby McGregor-Smith.
"The steps we have taken to counter these impacts include the restructuring of both frontline and support functions across facilities management 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."
McGregor-Smith, who became the first Asian female chief executive of a FTSE 250-listed firm when she took the reins at Mitie in 2007, will step down from the group's board next month.
Mitie chairman Roger Matthews said: "I would like to thank Ruby for the significant contribution that she has made to Mitie over her 14 years on the board, the last 10 years as CEO.
"Under her strong and passionate leadership our FM business has been transformed with the ability to provide a broad range of services to our blue-chip client base. I wish her every success for the future."
In short
McGregor-Smith's incoming replacement, Phil Bentley, will have his work cut out for him.
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