Mitie Drops Most in 15 Years as Brexit to Result in Profit Missby
Clients deferring investment decisions following referendum
Company initiates cost saving programmes to counter slowdown
Mitie Group, a British property-services supplier, plunged the most on record in London trading after warning profit this year will miss its target amid an economic slowdown and a reduction in contracts in the wake of Britain’s vote to leave the European Union.
Operating profit will be “very significantly lower" and “materially” short of expectations, the Bristol-based company said in a statement on Monday. The shares declined as much as 27 percent, wiping about 240 million pounds ($313 million) off Mitie’s market value.
Mitie, which cleans and maintains Heathrow Airport terminals, is looking to cut costs by about 15 million pounds in the second half as it battles against a slowdown in spending on facilities management by both corporate clients and the public sector. It already warned on May 23 -- one month prior to the Brexit referendum -- that a number of clients had begun to delay or cancel projects.
Mitie’s outlook is a further sign that Britain’s economy is being disrupted by concerns about how the U.K. will fare alone, outside the European trading bloc. That the profit warning was the result of client uncertainty rather than operational failings will be of some comfort to shareholders, according to a note by Canaccord analysts Matthew Walker and Aynsley Lammin. Separately, Liberum analyst Joe Brent and colleagues commented in a note that peers such as Interserve Plc and Carillion Plc will also be impacted.
Mitie said it will spend about 5 million pounds on introducing measures to bolster efficiency. While the current environment is challenging, a "substantial pipeline of opportunities and a portfolio of high quality, long-term contracts" means Mitie remains confident about the future, it added.
The shares traded 26 percent lower at 200 pence as of 11.40 a.m. in London, with Interserve down 2.1 percent at 386 pence, and Carillion 1.3 percent lower at 255 pence.
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