Julia Irvine 26 Jun 2017 02:09pm

Mitie to replace Deloitte after challenging year

Troubled facilities management group Mitie is calling time on its 30-year relationship with Deloitte as its auditor and announced that “it is in the best interests of the company” to put the audit out to formal tender

The audit committee says it wants to have a new auditor in place during the financial year ending 31 March 2018.

The move follows an extremely challenging year for the business during which it lost its high-profile chief executive Ruby-McGregor Smith and its chief financial officer Suzanne Baxter, made a number of profit warnings and had to write down more than £50m in profits following an accounting review by KPMG which found a number of “material errors”.

Deloitte has audited the FTSE 250 company, which employs some 52,000 people around the world, since it was first listed in 1987. This year its audit fee was £1.077m, up from £766,000 in 2016.

The Big Four firm’s appointment was reconfirmed in 2012 after it won a formal tender. Mitie said that it concluded that Deloitte should be re-appointed “given its relevant experience in both the listed company environment and the support services sector”.

However, KPMG’s finding that Mitie had complied with accounting standards but had used “less conservative” methods than others in the market and the impact on profits has made the audit committee revisit its decision.

In its 2017 accounts, Mitie refers to a “number of prior year errors that, due to their materiality, require the restatement of the results for the year ended 31 March 2016, as well as the consolidated balance sheet positions as at 31 March 2016 and 31 March 2015”.

These led to an error of £60.5m, requiring a £26m restatement of goodwill impairment and other adjustments of £20.9m in the 2016 financial statements and adjustments of £13.6m relating to earlier years.

Mitie also reveals additional material balance sheet write-downs of £44.9m as a result of KPMG’s review. It has created new provisions and accruals of £14.8m resulting in a pre-tax adjustment to net assets of £59.7m. These are additional to the £14m of one-off charges identified in the January 2017 trading update.