Short positions in Mitie (MTO) have fallen precipitously since April, from a high of more than 14 per cent to just under 4 per cent. However, some of those investors may have been too quick to close their positions. Shares in the outsourcer fell 9 per cent on the morning management announced first-half operating profits would be flat or down on the same time last year, albeit in line with their expectations.
Investments in customer service and the group’s “connected workspace” initiative were partly to blame, but a panoply of issues from across the group’s businesses also contributed. The social housing business's weak performance is expected to have a knock-on effect on engineering services, which also saw revenues impacted by contract losses. An unfavourable contract mix affected profitability in the cleaning division, while weaker sales in outdoor events led management to expect profitability in the catering division to be disappointing. Profitability was constrained in the care and custody division, albeit by mobilisation costs for a Home Office detention and escorting contract. Professional services and security - which accounted for an aggregate quarter of revenues in the year to March 2018 - were the only divisions where no issues were reported.
Cost-cutting programme “Project Helix” has continued to generate savings, with a cumulative in-year reduction of £40m expected by March 2019. However, timing changes for a workflow project in engineering services may delay some of the benefits, although management expects to counterbalance this by integrating the property management and engineering division.
