Outsourcing group Mitie’s shares drop 25% amid profit warning

Some property project programmes had been delayed this year, the company said, as social housing rent reductions that came into effect in April and budgetary pressures faced by local authorities had reduced funding available for repairs, maintenance and projects.

“We have taken strong action to counter the impact of these pressures by making changes now to the way we operate and initiating cost efficiency programmes across the group”. Some big customers such as Lloyds Banking, Vodafone and Sky had extended contracts with Mitie by several years, the company said, adding that it was confident of a better second half as new orders pick up.

Mitie, led by Tory peer Baroness Ruby McGregor-Smith, said operating profit for the half-year would be “very significantly” lower, sending the shares crashing almost 25%.

Mitie said it was facing short-term economic pressure including lower United Kingdom growth rates, changes to labour laws, further public-sector budget cuts and European Union referendum-linked uncertainty.

In the first half of the year, Mitie expects revenue to be “modestly lower” and operating profit to be “very significantly lower” when compared with the same period last year. Operating profit for the full year is now expected to be materially below management’s previous expectations. It also said it was reviewing its options regarding its healthcare business, which provides local authorites with a range of services such as home care for the elderly, as trading conditions in the sector remained challenging.

Broker Liberum cut Mitie’s forecast earnings per share by 30pc to 7.4p on the back of the surprise warning.

Mitie peer Mears Group Plc has already indicated its intention to exit “unsustainable” care contracts.