Mitie Group PLC (LON:MTO) has revealed that it is being investigated by the Financial Conduct Authority over the "timeliness" of the outsourcing firm’s profit warning last September and the preparation and content of its financial information, although its shares only edged lower.
In a brief statement, the FTSE 250-listed firm said the FCA had informed it on August 25 about the investigation, which will also look at the manner of preparation and content of Mitie’s “financial information, position and results for the year ended March 31 2016”.
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Mitie added: "The company is fully cooperating with the FCA but does not intend to update the market until completion of the investigation.”
Neil Wilson, senior market analyst at ETX Capital said: “While we thought it may be turning a corner with new leadership and a focus on cutting costs, this is not the kind of thing to reassure investors who are only now beginning to warm to the stock again after apparently shaking off last year’s loss.
“The FRC has just opened its own investigation into Deloitte’s auditing of Mitie’s accounts. And it was ‘aggressive’ accounting practices that pushed the group into a loss last year. These charges were worth over £88m and while investors will have hoped this was the end of it, the FCA investigation will be an unwanted distraction.”
In late afternoon trading, however, Mitie shares recovered from earlier falls to edge 0.3%, or 0.8p higher to 266.6p.
Outsourcing companies such as Mitie and peer Capita PLC (LON:CPI) have been hit this year by rising labour costs and expenses related to unplanned changes to contracts which were taken on during the financial downturn, often with paper-thin margins.
Mitie, which employs 53,000 people to work with central government, the National Health Service and across the transport network, warned on profits three times last year, blaming uncertainty around Britain's decision to leave the European Union and higher costs.
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It appointed Phil Bentley - former boss of Centrica PLC's (LON:CNA) British Gas arm - as its chief executive in October last year and the new management team commissioned KPMG to review its accounts.
Mitie has since predicted a return to modest growth in underlying profit, citing new contracts and cost cuts.
-- Adds analyst comment, updates share price --