Mitie issues profit warning as squeeze on social housing takes its tollComments Off on Mitie issues profit warning as squeeze on social housing takes its toll
Shares plunged 7% as the firm headed up by Ruby McGregor Smith for the past seven years said council spending cuts had hit its home-care and social-housing businesses.
Mitie carries out maintenance and repairs for more than 100 local authorities and social-housing firms, under the brands PeopleCare, PropertyCare, and CarbonCare, but admitted spending cuts have bit into its contracts.
The firm claimed that it remained “confident of longer-term opportunities” in social housing, however, and City analysts agreed.
Andrew Gibb at Investec said: “We expect the pricing pressure in home care and social housing to be short lived and it should not detract from the clear strength of [Mitie’s facilities management] offering.”
Mitie also said it’s pulling out of its mechanical and electrical engineering construction business, at a total loss of up to £16 million for the year to April.
But it was the social-housing squeeze that meant “we expect our full-year, headline operating profit to be slightly below current market expectations,” said Mitie.
Still, only 5% of group revenues come from that division, with facilities management making up 85% of Mitie’s earnings, and property management constituting the rest.
The City had pencilled in operating profits of about £132 million for Mitie this year. Trimming that today sent the shares down 19.7p to 272.7p — Mitie’s worst day on the stock exchange since June 2012.
The firm this month opened a review into part of its home-care business after facing allegations over the way it treats workers.
One of Mitie’s divisions paid by local councils to visit elderly and disabled people stood accused of failing to give carers enough time to travel between jobs.
As a result, they had to curtail visits or work longer for the same pay, potentially pushing them below minimum-wage rates.