Facilities management contractor Mitie has reported a half-year loss of more than £100m before tax, compared with a £45m profit a year earlier, citing “changing market conditions”.
The property maintenance company blamed the loss on rising labour costs reductions in higher margin project work. A write-off of £107.1m of goodwill in the home healthcare business, which the firm has decided to pull out of, accounted for a good chunk of the losses.
The Mitie board said of its decision to change strategy: “This has been a difficult decision, but it is the right option for the long-term future of Mitie and its strategic focus on FM.”
For the six months to 30 September 2016, Mitie made a pretax loss of £100.4m on revenue down 2.6% to £1,094m. Operating profit was down 39% to £35.4m.
Ruby McGregor-Smith
The company said: “Currently we are in the middle of one of the periods where there is a lot of change happening. Growth in the UK economy is low and wages are rising because of increases to the minimum wage, pension costs and apprentice levies. This, and the resulting differentials in pay, will cause labour to be more expensive in the UK over the coming years.
“Together with an anticipated increase in the costs of imported goods and services we are likely to see price rises in a range of markets in the future. This period of transition in the UK economy will create pressures for our clients but our evolving outsourcing model will generate more opportunities.”
Baroness Ruby McGregor-Smith steps down as chief executive on 12 December 2016 after almost 10 years in the role and will be replaced by Phil Bentley, formerly of Cable & Wireless and British Gas.
McGregor-Smith said: “The first half of this year has been difficult. Second half performance is expected to improve with our new operating model as we adapt to market conditions.”
In more positive news Mitie, which holds big contracts with the Ministry of Justice and Home Office, said it had won £170m worth of new contracts with companies such as Manchester Airports Group, Network Rail, and the Scottish Police Authority.
