(Reuters) - Britain’s services firm Mitie (MTO.L) announced on Wednesday a new writedown costing as much as 50 million pounds and said it might restate accounts to March 2016, but its shares climbed more than 7 percent as it reported steady revenues.
The provider of pest control, property cleaning, security and ancillary healthcare undertook a review of its accounts after issuing three profit warnings in a year, blaming uncertainty surrounding Brexit and rising costs.
The company, which previously announced a 14 million pound one-off charge, said it would write down an additional 40 million to 50 million pounds as its auditor had found the way it booked work-in-progress on long-term contracts and costs relating to contracts was less conservative than rivals.
It said only 6 million pounds of the writedown would be cash outflows in the year to March 2018. The rest would be asset writedowns that would not hit future profitability.
“Whilst clearly Mitie was in a mess, the key ... is that trading is in line ... and the balance sheet review has been completed without any significant negative cashflow or ongoing impacts,” RBC analyst Andrew Brooke wrote in a note.
Mitie said revenue for the year to March 2017 was flat compared to year ago and that trading performance was largely in line with previous expectations.
Mitie has fared worse than rivals as its margins on long-running contracts have been squeezed by higher labour costs. Its greater exposure to catering and other discretionary budget services also left it vulnerable to cutbacks by clients.
Mitie's shares, which have lost 22 percent over the past year, were up 7.8 percent to 228 pence at 0914 GMT, making it the top FTSE midcap gainer .FTMC. The stock was trading at 269 pence before its first profit warning in September 2016.
CEO Phil Bentley, who overhauled the management since starting in December, said Mitie had set clear “measurements” for costs and people, and the underlying business would not be undermined by the accounting adjustments.
“We have appointed a new executive leadership team - with a new way of working and we are confident the business will generate significant shareholder returns over the forthcoming years,” he said.
Canaccord Genuity said Mitie’s management had been quick to address balance sheet concerns hanging over the company.
Mitie said it was starting talks with lenders to change its banking arrangement and would hold an investor meeting on June 12 to seek investor approval to raise its borrowing limits to 1.5 billion pounds.
The firm had been due to issue its full-year results in May, but said on Wednesday it would delay results till June.
Reporting by Esha Vaish in Bengaluru; Editing by Edmund Blair