Mitie has just posted a £100m+ half year loss, which represents an awful outcome for the once FM sector darling. The loss comes as a result of deciding to withdraw from the Healthcare Sector as it writes off its investment in the domiciliary care provider Enara only five years after they paid more than £100m for it.
The decision comes in part from the failure to make its domiciliary care contracts perform. Margins have come under pressure as the minimum wage makes input costs much higher than predicted.
Other public sector outsourcers such as Capita and Interserve are also under pressure and have seen changes in senior management.
Public sector outsourcers have struggled for years to strike a balance between their public image of rapacious private sector profiteers, and genuinely helping transform our public services. I think the sector is about to reassess its relationship with central government again.
Shares in Mitie plummeted 17 per cent on Monday morning after it announced a first-half loss and the sale of its healthcare business as uncertain economic conditions and the rise in the UK minimum wage took its toll. The FTSE 250 outsourcer, which cleans offices, courts and supermarkets throughout the UK, warned that earnings for the full year were likely to be below previous guidance. It posted a £100.4m pre-tax loss for the six months to the end of September, compared with a £45m profit for the same period last year. Revenues fell to £1.09bn compared with £1.12m a year earlier.