Outsourcing company Mitie group saw shares fall over 25 percent this morning, after issuing a profit warning in the wake of the European Referendum.
Mitie (LON:MTO) expect revenue to be “modestly lower” in the first half of the year, with operating profit down “very significantly”. The company cited “lower UK growth rates, changes to labour legislation and further public sector budget constraints, and uncertainty both pre and post the EU referendum” as reasons for the downturn in profit.
Mitie still expects a small amount of revenue growth over the full year, in line with previous guidance. However, operating profit for the full year is now expected to be well below previous forecasts, “as a result of a continuation of the pressures experienced in the first half and further one-off costs of organisational change associated with our cost efficiency programmes, which are expected to total up to £10 million in the year.”
As to current market conditions, the group said “there has been a good level of activity in our single service businesses and we are successfully securing a good flow of new contracts. The pipeline of opportunities for new integrated facilities management and single service and bundled contracts remains strong.”
“However, we are finding that the recent economic uncertainty is currently driving clients to renew or extend larger contracts with existing suppliers including Mitie, a trend we have seen over the last 18 months, and to defer investment decisions. This has impacted growth in the first half.”
Mitie, one the UK’s largest outsourcing groups run by chief executive Baronness Ruby McGregor-Smith, offers facilities management services to high-profile clients including the NHS, London City Airport and Linkedin.
Mitie Group is currently trading down 25.88 percent at 199.30 (1156GMT). Mitie’s profit warning has had a negative effect on similar outsourcing groups today including Carillion (LON:CLLN) , down 1.08 percent, and Interserve (LON:IRV), down 2.09 percent.