Mitie shares plummet 20 per cent as it is squeezed by Brexit and National Living Wage

Customers have cut back on spending after the referendum, says outsourcing firm

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The Independent Online

Outsourcing company Mitie saw its shares slump more than 20 per cent on Monday after it issued its second profit warning in two months in a further sign that Brexit is hurting the UK’s services industry.

Mitie predicted full-year earnings will be below management’s previous expectations. Its half-year results revealed a £100m loss, compared with a £45m profit a year earlier, which it blamed on “changing market conditions”. 

The company also put its healthcare unit “under strategic review” and said it will pull out of the home healthcare market, which provides carers for people suffering conditions such as dementia. The move will cost £107m. The company’s shares dropped as much as 21 per cent on the news, before recovering some of the losses.

Chief executive Ruby McGregor-Smith said the first half of the year had been “difficult”.

“Second half performance is expected to improve with our new operating model as we adapt to market conditions,” she said.

But the company warned: “Due to ongoing market uncertainties, underlying earnings for [the full year] are expected to be below management's previous expectations.”

Mitie is facing higher labour costs following the introduction of the Government's National Living Wage in April, as well as reduced confidence in its customers’ businesses. The company blamed its bleak forecast on lower levels of higher-margin project work and reduced discretionary spending by clients.

“Performance has been impacted by uncertainty around the referendum,” Mitie said.

However, it did say it had secured some new contracts and so an “improved performance is expected in the second half of the year”.

Some analysts said Mitie has exaggerated the impact of the referendum. “I think their costs are out of sync and their margins have always been very high relative to other people and that's the issue,” Howard Seymour of Numis Securities told Reuters. “The market is not good, but it's not [bad] to the same degree that [Mitie are] saying by any stretch of imagination.”