UK outsourcing firm Mitie Group PLC (LON:MTO) reported a 4.2% fall in first-half adjusted operating profit, reflecting changes to some contracts and higher administrative expenses.
The company, which provides security, cleaning and engineering services to clients such as Vodafone Group PLC (LON:VOD) and J Sainsbury plc (LON:SBRY), said operating profit before other items fell to £38.4mln in the six months to September 30, from £40.1mln a year ago.
Mitie’s cleaning and environmental services division’s margins were dragged lower by previously-flagged contract changes while the care and custody arm, which provides services to UK immigration centres, incurred costs of £3.3mln related to the mobilisation of a detention and escorting services contract.
The group has been divesting non-core businesses and investing in technology and employee retention as part of a turnaround strategy.
It recently agreed to sell its social housing business to Mears Group PLC (LON:MERG) for £35mln in cash and has sold its pest control business to Rentokil Initial plc (RTO.L) for £40mln in cash.
READ: Mitie shares fall as it sells pest control division to Rentokil for £40mln
Mitie said the so-called ‘Project Helix’ turnaround plan was delivering in line with the plan in the second year of implementation and continues to expect modest top-line growth this year and for margins to improve to between 4.5% and 5.5% in the medium term.
The company aims to reduce operating costs by an annualised £50mln by the end of the fiscal year 2019.
Ahead of the UK’s withdrawal from the European Union next March, Mitie said it is considering stocking up for the short-term in a number of critical items but the impact is not expected to be material for its results.
Mitie is also working with key suppliers to ensure a continued availability of supply in case there are any disruptions to the import of materials from UK manufacturers after Brexit.
In morning trading, shares fell 1.4% to 154p.