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Mitie shares fall after rising staff costs lead to half-year loss

Published 21/11/2016

Mitie's outgoing chief executive, Ruby McGregor-Smith, said the first half of the year had been difficult
Mitie's outgoing chief executive, Ruby McGregor-Smith, said the first half of the year had been difficult

Shares in struggling outsourcing firm Mitie plummeted on Monday after the company swung to a £100.4 million half-year loss and again issued a profit warning as increased economic uncertainty and higher staff costs continued to bite.

The firm put its performance, which compares to a £45.1 million profit in the same period last year, down to "changing market conditions as clients adjust to rising labour costs and economic uncertainty".

The group's shares were down 9.29% to 190.2p in morning trading.

Mitie warned that full-year earnings are expected to come in below management's previous expectations due to "ongoing market uncertainties" and "weak UK business confidence affecting client investment plans". Revenue for the period fell 2.6% to £1.09 billion.

The company also announced that it is withdrawing from the domiciliary healthcare market, placing its healthcare unit under strategic review.

Mitie said: "Our healthcare businesses will continue to fulfil all obligations but there will be no investment in new areas of this market. Mitie will manage its withdrawal in an orderly and responsible manner.

"The board has changed its long-term view of this market. All healthcare goodwill and intangibles have been written off."

The firm has written off £107.1 million of goodwill as a result of the move.

Outgoing chief executive Ruby McGregor-Smith said: "The first half of this year has been difficult but we are not alone in facing significant macroeconomic challenges.

"Second-half performance is expected to improve with our new operating model as we adapt to market conditions"

Mitie also cut its dividend from 5.4p to 4p.

Neil Wilson at ETX Capital said: " Rising staffing costs are not going to get much better with the National Living Wage set to rise along with pension costs and apprentice levies.

"Labour costs will rise and a weak pound will further drive up imported goods and services. All this puts pressure on Mitie's clients and make them less likely to spend."

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