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Mitie expecting £40m-£50m hit after accounting review

Struggling outsourcing firm Mitie has revealed a hit of up to £50 million after a review of its books and said 160 jobs have been axed as it seeks to slash costs.

The group, which has been under pressure amid a string of recent profit warnings, said it was expecting to take a writedown of £40 million to £50 million following the accounting review by auditor KPMG.

It said KPMG had uncovered accounting practices that were "less conservative, albeit still justifiable, than others in the market".

But it added the review had also found a " number of material errors" which mean 2015/16 accounts may be inaccurate and could end up boosting 2016/17 results by between £10 million and £20 million.

The group also updated on its overhaul and said around another 160 jobs have been axed since January as it looks to cut costs after a difficult year.

Mitie said this was the "first wave of a new cost reduction programme", with more details due as part of a strategy update when it reports full-year results on June 12.

The group said it was also starting talks with its lenders to give it more wriggle-room to ensure it does not breach banking covenants.

Despite the latest blow to the group, shares lifted nearly 7%.

Phil Bentley, chief executive of Mitie, said: "Full-year 2017 has undoubtedly been a challenging year, but Mitie remains a strong and successful business, and is continuing to deliver for our customers.

"Whilst these accounting adjustments in FY 17 affect our reported profits, they do not affect the underlying strength of our business."

The accounting review was announced in January as the group seeks to turn itself around after issuing three profit warnings since September.

Its property management and technical facilities management arms have been blighted by contract delays, while its cleaning division has been under-performing.

Mitie has overhauled its management as part of recovery efforts, with Mr Bentley appointed in December and Sandip Mahajan hired as chief financial officer on February 10.

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