Mitie under investigation by FCA over profit warnings

Mitie (LON:MTO) has announced that it is under investigation by the Financial Conduct Authority over its annual results and the timing of a September 2016 profit warning.

The group said on Tuesday that it was informed of the investigation on Friday and had been “fully cooperating” in the process.

In May, the outsourcing company reported a “number of material errors” in accounts. In an external review by KPMG found that there would need to be write-downs of between £40 and £50 million.

For full year results, Mitie saw a pre-tax loss of £58.2 million for the full year.

The company had a new chief executive in December. Phil Bentley has restated its historical accounts, announced the appointment of a new auditor and sold a loss-making unit of the company.

Bentley announced plans earlier this year to cut the dividend from 12.1p per share to just 4p. This will then allow the funding of a new technology that will allow clients to have cleaners on demand, as well as the ability to track staff.

Connected Workplace is the new strategy that is part of Bentley’s attempts to make the group more efficient.

Mitie is not the only outsourcing company to be hit by rising labour costs and changes on contracts that were taken on during the financial downturn. Capita and Carillion have also felt the effects of the changes.

The outsourcing group provides services such as cleaning to corporate companies including Tesco (LON:TSCO), Lloyds (LON:LLOY) and many public sector bodies.

News of the FCA investigation comes just after the Financial Reporting Council began a probe into Deloitte, Mitie’s auditor, to make sure there had been no “breaches of relevant requirements” in the auditing of Mitie’s 2015 and 2016 accounts.

Shares in the group increased slightly on Tuesday, to 267p.