Living wage backed by outsourcer Mitie Group

Outsourcing giant Mitie Group hailed the national living wage yesterday as a good way of keeping staff, and assured investors that it would have “no material impact” on its future earnings.

Mitie chief executive Ruby McGregor-Smith. Picture: Ed Robinson/OneRedEye

It came as the company, whose clients include the Scottish Government, said profits fell in the six months ending 30 September amid losses at its healthcare division.

Mitie, one of Scotland’s biggest private sector employers, said it was “positive” about the introdution of the national living wage.

It said the move, unveiled in last summer’s Budget by George Osborne, would help “ensure that many of our people are better rewarded and feel more motivated to do the jobs they do, as well as improve retention rates across our business. No material impact on future earnings is anticipated”.

Pre-tax profit fell 12.1 per cent to £50.1 million from £57m, while revenue rose 2.6 per cent to £1.12 billion. In healthcare, revenues fell by 19.1 per cent to £39m, swinging to an operating loss in this area of £2.1m from operating profit of £4.5m in the year-ago period.

In this division it said it has left unprofitable contracts and consolidated branches, stating “we are addressing the short-term challenges that we have seen in the homecare market”.

Mitie chief executive Ruby McGregor-Smith said: “Mitie has had a positive start to the year.” She said its focus on the services sector, mainly in facilities management (FM), “will ensure we continue our long-term track record of sustainable profitable growth”.

McGregor-Smith added that the group is “particularly pleased with recent contract awards and retentions. This gives us confidence we will deliver a good full-year performance.”

In May, the company said it had retained and expanded a contract with Standard Life Investments, as well as extending its partnership with Lloyds Banking Group, owner of Bank of Scotland and Scottish Widows, for a further seven years.

Overall facilities-management revenues grew by 2.5 per cent to £946.2m. Regarding the group’s order book, Mitie described this as “healthy” at £8.5bn compared to £9bn in March.

Analyst Andrew Gibb at Investec was a little more cautious, stating: “There is clearly much to do in the second half, and much will depend on the performance of healthcare.”

Gibb was confident that the business can achieve another year of profit growth, attributable in part to robust interim trading by its core UK FM business. “We continue to believe the group is well-placed for the medium term,” he said.