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UK's Mitie announces writedown, shares rise as revenue steady

[LONDON] Britain's services firm Mitie said on Wednesday it expected to write down as much as £50 million (S$90.1 million) and might restate accounts to March 2016 but also said revenue remained steady, helping lift its shares 5 per cent.

The provider of pest control, property cleaning, security and ancillary healthcare undertook a review of its account after issuing three profit warnings in a year, when the firm was hit by uncertainty surrounding the Brexit vote and rising costs.

Mitie said it would writedown £40 million to £50 million as its auditor KMPG had found the way it booked work-in-progress on long-term contracts and costs relating to contracts was less conservative than rivals.

But Mitie also said revenue for the year to March 2017 was flat compared to year ago, helping drive its shares up 5 per cent to 222.1 pence at 0733 GMT, making it the top FTSE midcap gainer . Full-year results will be announced on June 12. "Whilst clearly Mitie was in a mess, the key with this statement is that trading is in line ... and the balance sheet review has been completed without any significant negative cashflow or ongoing impacts," RBC Europe Ltd analyst Andrew Brooke wrote in a client note.

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The company said the writedown, on top of a previously announced £14 million one-off charge, would involve a £6 million outflow of cash in the year to March 2017. It said the rest would be an asset writedown that would have no impact on profitability.

Mitie has fared worse than rivals due to new laws on pay and training that have pushed up costs on long-running contracts and because it has greater exposure to catering and other discretionary spending businesses that make the firm vulnerable to cutbacks by clients, analysts say.

Mitie said it was starting talks with lenders to change its banking arrangement and was seeking to raise its borrowing limits to a fixed amount of £1.5 billion. It said it would hold an investor meeting in June 12 to seek approval.

Under Chief Executive Officer Phil Bentley, who took over in December, Mitie has exited its loss-making home healthcare business and overhauled management.

Mitie said its trading performance was unchanged, although costs related to the business overhaul had increased by £5 million since January after it cut 160 more roles in a cost reduction programme.

The firm had been due to issue its full-year results in May, but said the delay till June was to give the company time to start talks with lenders and allow the auditors to complete their work.