City watchdog investigating Mitie over last year’s profit warning

OUTSOURCING group Mitie has revealed it is under investigation by the Financial Conduct Authority (FCA) over the timing and content of a profit warning last year.

The company said yesterday that the FCA had commenced an investigation into a profit warning on Sept 19 2016, when it said that “significant economic pressures” would cause first-half sales and profits to fall.

The FCA is also looking into “the manner of preparation and content” of Mitie’s results for the period ending March 31 2016.

In May, Mitie reported that an external review of its accounting policies by KPMG would result in write-downs totalling between £40m and £50m. It said a “number of material errors” had been found in the accounts. But in its full-year results in June, Mitie said it had taken a hit of £88.3m as it reported a pre-tax loss of £58.2m, compared to a profit of £91.9m in the previous year.

“The company is fully co-operating with the FCA but does not intend to update the market until completion of the investigation,” it said yesterday.

Shares in the company rose slightly yesterday, to 266.8p. The news comes just weeks after accounting watchdog the Financial Reporting Council began an investigation into Mitie’s auditor, Deloitte, to see if there had been any “breaches of relevant requirements” in the auditing of Mitie’s full-year accounts for 2015 and 2016.

Mitie is currently tendering for a new auditor after 30pc of shareholders voted against Deloitte remaining in the position at the company’s annual general meeting last month. The firm is in the middle of a £45m cost-saving programme called “Project Helix”, which so far has seen it cut its number of staff by around 3,000.

Mitie has seen a number of months of change under Phil Bentley, its new chief executive, who took over from previous boss Baroness Ruby Mcgregor-smith at the end of last year. Mr Bentley announced in a financial update earlier this year that he planned to cut the dividend from 12.1p per share to just 4p per share to fund new technology that would allow the firm’s clients to have cleaners on demand and track their staff.

The strategy, called “Connected Workplace”, is part of Mr Bentley’s drive to make Mitie more efficient. It provides services to companies such as Lloyds and public sector bodies.