Services and maintenance group kick-starts £45m cost efficiency programme

Mitie has confessed that assessing its underlying performance has been “difficult”, after errors prompted a review of its accounting policies, leading to the restatement of the services and property firm’s previous year’s figures.

The group, which said it was undertaking what it called a “major transformation programme” that includes a £45m cost and job-cutting programme labelled ‘Project Helix’, said today adjusted operating profits came in at £82m for 2016/17, down 13.9%, while adjusted turnover saw a 0.3% increase, to £2.14bn.

Reported figures for the year showed turnover down 1% at £2.13bn and an operating loss of £49m at Mitie, which provides maintenance services to around 100 councils and housing associations on top of the facilities management that makes up the bulk of its business.

Back in January Mitie warned that profits would be down for the year ended 31 March 2017, with more one-off charges likely in relation to contractual issues.

This morning it said that its accounting review, which concluded last month and was supported by KPMG, had identified a number of prior year errors that required the restatement of results for periods before 31 March 2017. These led to an error around goodwill impairment of £60.5m, it added.

In response to the review, Mitie said it had included additional material balance sheet write-downs of £44.9m and created new provisions and accruals of £14.8m, resulting in a pre-tax adjustment to net assets of £59.7m.These were in addition to the £14m of one-off charges highlighted in its January 2017 trading update.

In a statement Mitie said: “A key finding of the accounting review was that the group’s accounting was less conservative than peers. In response, £39.7m of additional asset write-downs were recognised which were more judgemental in nature, and would result in no future cash outflow.

“Management considers that the accounting review and resulting write-down of the balance sheet at 31 March 2017 reflects a fair and balanced assessment process.”

The group said its order book was down 1.5% at £6.5bn, while its pipeline was up 10% at £8.7bn. Due to lower earnings of the group, Mitie said investors would not receive a final dividend, with a total pay-out being limited to 4p a share, versus 12p last year.

Phil Bentley, Mitie’s chief executive, said it had been a “challenging year” for the business. “We have reported a loss as a result of the one-off accounting adjustments arising from the accounting review. We are now focused on the future of the business and I am encouraged that our order book has held up and our pipeline is growing.

“Following a full strategic review we are investing in technology in the workspace to meet our customers’ evolving needs and we are embarking on a major cost reduction programme. With the support of our 53,000 colleagues, we will take Mitie ‘Beyond FM…to the Connected Workspace’.”