Mitie Group may cut 480 jobs as clean-up costs rise

Unite union requests meeting with outsourcing company to discuss how job cuts will affect business activities. Mitie Group may cut up to 480 jobs as it overhauls its cleaning and engineering divisions, saying the cost of its turnaround will be higher than expected.

The provider of pest control, cleaning, security and healthcare services is restructuring after a string of profit warnings, which it has blamed on uncertainty surrounding Brexit and rising costs.

Britain’s largest trade union, Unite, which has more than 1,000 members working across Mitie, said it called for talks with the company’s management over the job cuts.

Unite national officer Rhys McCarthy said the union was seeking an urgent meeting with the company to discuss how these job cuts would affect the company’s sectors and activities.

Mitie shares fell 4.6% to a three-month low in early trading on Wednesday, before recovering to close 0.6% down at 257p.

“Higher cost expectations are tied to higher cost to serve, overheads, and investments in the connected workspace. While these limit margin improvement today, some are temporary,” Rory McKenzie, an analyst at UBS, said in a note.

British outsourcing companies such as Mitie, Capita and Carillion have been hit over the past year by rising labour costs and unplanned changes to contracts that were taken on during the financial downturn, often with paper-thin margins.

Mitie, which employs 53,000 people, has already cut about 200 jobs and there were signs of more to come.

Analysts at Jefferies and Bank of America Merrill Lynch said the rising cost of the clean-up – now £24m from an earlier £15m – was an issue.

The company said revenue so far this year was ahead of its expectations and was seen at about £1.1bn for the first half of the year, 4% ahead of the prior full-year period. The company said this trend should continue.

As part of its overhaul, Mitie has restated its accounts, said it would appoint a new auditor and sold a loss-making business.

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