Jessica Fino 4 May 2017 11:58am

Mitie writes down £50m in profits after accounting review

Outsourcing company Mitie has announced a hit of up to £50m to its 2016/17 profits after an accounting review conducted by KPMG found a number of “material errors”

Mitie asked KPMG in January to review its balance sheet items, which covered the material balances of accrued income, mobilisation costs, percentage of completion accounting and the recoverability of trade receivables, as well as the carrying value of certain other assets.

As a result, the company said it expected to write down its balance sheet by between £40m and £50m.

The review found that Mitie complied with the accounting standards but used “less conservative” methods than others in the market.

The company said it has cut 160 jobs since January in a bid to reduce costs.

Phil Bentley, Mitie’s chief executive, said 2017 had been “undoubtedly a challenging year”, with the accounting adjustments expected to affect its reported profits.

Bentley added, “Mitie has a well-diversified portfolio of high quality customers and an outstanding range of capabilities. 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."

The chief executive joined the company in December, after the resignation of Ruby McGregor-Smith.

McGregor-Smith, who trained to be an accountant at BDO from 1985 to 1991, had been a director at Mitie since December 2002 and served as chief executive since April 2007.

She left the company in December after issuing two profit warnings. In November, the company said its first half results had been impacted by changing market conditions as clients adjusted to rising labour costs and economic uncertainty. Revenues and profits also declined due to delays in several contracts.

In January, Mitie posted further profit warnings, saying that it would incur a one-off charge of £14m.

The most recent writedown will be additional to the £14m previously announced.

Mitie said its full year results would be released on 12 June instead of the initially planned 31 March, to allow sufficient time to process the changes and for the auditors to complete their work.