MITIE Group PLC (LON:MTO) has offloaded its pest control business to Rentokil Initial for £40mln in cash.
The outsourcing group will use the majority of the proceeds to strengthen the balance sheet and pay down some of its pension deficit. Anything left over will be reinvested into the core business.
READ: Mitie warns on profits as order book declines
“By teaming up with Rentokil Initial - the UK's largest provider of Pest services - we free up funds to invest in our core businesses, whilst ensuring service quality and innovation are maintained for our clients,” said Mitie chief executive Phil Bentley.
Mitie has entered into a preferred supplier partnership with Rentokil, which will see the latter provide a range of services, including pest control, to Mitie’s customers.
Last week, Mitie said it expected full-year operating profit to be “flat to slightly down” after reporting a soft performance in its social housing unit, an unfavourable contract mix in its cleaning business and the write-off of some mobilisation costs in its care and custody division.
Shares fell 1.16% to 145p early on Monday afternoon.
Liberum maintained a 'buy' rating on the stock but cut its target price to 210p from 240p and reduced its full-year earnings estimates.
"Trading statement guided to in line, but more second-half weighted than normal and we now reduce FD (fully diluted) EPS (earnings per share) by 4% before the Pest disposal. Sale of Mitie Pest Control Limited reduces future EBIT by £4.8mln and we reduce total FD EPS by 9% for 2019 onwards."