Outsourcing company Mitie sees lower-than-expected revenues
Outsourcing giant Mitie has warned over lower-than-expected revenues after concerns over the state of the economy led to a spate of cancelled work.
The FTSE 250 company said revenues fell short in the second half of its financial year, as economic uncertainty and pressures saw some projects delayed and others taken off the table altogether.
While revenues look set to come in shy of market expectations, it expects to hit its target for full-year profits, as it focuses on maintaining margins and investing for long-term growth.
It also shrugged off concerns about the impact of increases in the minimum wage and the National Living Wage, stating it was confident the wage hikes will not have a "material impact on future earnings".
Its shares price came under fire, falling nearly 7%.
The firm said it was confident of achieving future growth and had a "track record of responding to changing market conditions and client needs".
It said: "Due to current macroeconomic factors, we anticipate modest growth in the next financial year."
The group added: "We have a substantial order book and sales pipeline. We continue to see a range of good outsourcing opportunities across our key markets and we remain positive about the group's prospects for the future."
It said a strong first half for its property management business tailed off in the second half of the year, as it was hit by a change in spending patterns by local authorities and housing associations ahead of the 1% reduction in social housing rents on April 1.
It said its facilities management business was buoyed by a string of contracts, including a deal with NHS Property Services worth £150 million over the next five years.
It also landed a five-year contract worth £80 million with betting giant Ladbrokes, providing cleaning, waste and pest control services to 2,000 betting shops and the company's head office.
Peel Hunt analyst Christopher Bamberry said Mitie was reacting to growing employment costs by investing in technology to drive efficiency which " reduces revenues but sustains profitability".