September 20, 2017 / 6:47 AM / in a year

Mitie may cut 480 jobs, raises clean-up costs

(Reuters) - British outsourcing company Mitie Group (MTO.L) may cut up to 480 jobs as it overhauls its cleaning and engineering divisions, and said the cost of its turnaround would be higher than expected.

The provider of pest control, cleaning, security and healthcare services is restructuring after a string of profit warnings, which it has blamed on uncertainty surrounding Brexit and rising costs.

Britain’s largest trade union, Unite, which has more than 1,000 members working across Mitie said it called for talks with the company’s management over the job cuts.

Unite national officer Rhys McCarthy said the union was seeking an urgent meeting with the company to discuss the implications how these job cuts will affect on the company’s sectors and activities.

Mitie shares fell 4.6 percent to a three-month low of 246 pence in early trade on Wednesday, before recovering some of these losses later in the day.

“Higher cost expectations are tied to higher cost to serve, overheads, and investments in the connected workspace. While these limit margin improvement today, some are temporary,” Rory McKenzie, an analyst at UBS, said in a note.

British outsourcing companies such as Mitie, Capita (CPI.L) and Carillion (CLLN.L) have been hit over the past year by rising labour costs and unplanned changes on contracts that were taken on during the financial downturn, often with paper-thin margins.

Mitie, which employs 53,000 people, has already cut around 200 jobs and there were signs of more to come.

Analysts at Jefferies and BofA Merrill Lynch said the rising cost of the clean-up — now 24 million pounds from an earlier 15 million pounds — was an issue.

The company said revenue so far this year was ahead of its expectations and was seen at about 1.1 billion pounds for the first-half of the year, 4 percent ahead of the prior full-year period. The company said this trend should continue.

As part of its overhaul, Mitie has restated its accounts, said it would appoint a new auditor and sold a loss-making business.

Additional reporting by Noor Zainab Hussain in Bengaluru, editing by Louise Heavens

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