Nearly £280 million was slashed from the value of outsourced services provider Mitie Group yesterday after a shock profits warning partly blamed on the Brexit vote.
Mitie, whose string of high-profile contracts includes cleaning and maintaining the Scottish Parliament building, warned in a trading update that first half profit would be “very significantly” lower while revenues would be modestly down. It said trading results would also be impacted over the full year.
The company said it was being hit by lower UK economic growth rates, changes to labour legislation, public sector budget constraints and uncertainty about how the UK will negotiate its exit from the European Union.
“We are finding that the recent economic uncertainty is currently driving clients to renew or extend larger contracts with existing suppliers, including Mitie, a trend we have see over the past 18 months, and to defer investment decisions,” Mitie said.
Shares in the group, whose healthcare services include home care for the elderly and hospital cleaning, slumped nearly 30 per cent, or 77.7p, to 191.3p – their largest fall since 1987.
Mitie pointed towards a slowdown in that core market as well as in its property management unit, which offers services ranging from interior installation to maintenance.
The FTSE 250 company, whose clients also include aero-engine maker Rolls-Royce and the Home Office, said some property project programmes had been delayed this year as social housing rent reductions that came into effect in April, and budgetary pressures faced by local authorities, had reduced funding available for repairs and maintenance.
Liberum analysts cut their Mitie full-year earnings per share forecasts by 8 per cent, saying that management was guiding towards a 10-20 per cent fall in core earnings.
Some brokers said the profits warning from Mitie was also negative for rivals such as Mears Group and Interserve, whose shares both slid 2.4 per cent.
Mitie said it was reviewing its options regarding its healthcare business as trading conditions in the sector remained testing. Mears has already indicated its intention to exit “unsustainable” care contracts.
Mitie said it had already reacted to the more challenging backdrop for outsourced services businesses by initiating cost efficiency programmes across the group.
Among other high-profile clients north of the Border, the company does maintenance and cleaning work for Royal Bank of Scotland and Edinburgh-based life and pensions group Standard Life.
On the positive side, the group said it had secured some important new contracts in its core facilities management business “where our long term strategic positioning, order book and pipeline remain strong”.