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Mitie clients put project spending on ice as Brexit, elections loom

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By Reuters

By Noor Zainab Hussain

(Reuters) – British outsourcer Mitie Group Plc <MTO.L> said on Thursday that revenue growth would be affected by economic uncertainty induced by Brexit and upcoming elections as clients hold back on committing to new projects.

The company, which manages and maintains some of London’s landmarks, together with high street buildings and homes, is also concerned by possible changes to the U.K.‘s regulatory framework, as well as restrictions to the supply of labour and materials.

“We have seen a softer outlook for project work as opposed to maintenance, cleaning and security contracts, which are still growing,” Chief Executive Officer Phil Bentley told Reuters.

“Project works are discretionary, you have a capital budget and you spend it or you cut it back. We have seen a little bit of the latter,” he said,

Nonetheless, Mitie said operating profit from continuing operations and before other items rose 5.4% to 33 million pounds for the six months ending Sept. 30.

Under Bentley, who took over at the end of 2016, Mitie has embarked on a cost-savings drive to revive its fortunes. It has restated its historic accounts, announced it would appoint a new auditor and sold a loss-making unit.

Shares in Mitie were 1.3% lower at 140.8 pence at 0904 GMT.

Mitie said revenue growth in the financial year 2020-21 would be in line with this year and operating profit before other items will increase by mid-single digits.

The company, which is less dependent than its rivals on public sector work, said its order book grew 1% in the reported period to 4.1 billion pounds, helped by contract wins from the Bank of England, Her Majesty’s Revenue and Customs, and a major London airport.

Mitie also reported a rise in net debt to 148.1 million pounds.

Analysts at Jefferies, the brokers, said in a note that Mitie needs to improve net debt and earnings before tax, depreciation and amortisation to lower risks in its balance sheet before banking facilities expire in July 2021.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shounak Dasgupta and James Drummond)