Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Investigation launched into Mitie's financial statement

The Financial Reporting Council (FRC) has opened a new investigation into the reporting of Mitie’s 2016 year-end financial statement.

The investigation relates to a member of an accountancy body involved with the results and is not an investigation into Mitie itself. 

Mitie issued a statement to confirm that the FRC’s probe did not relate to any current directors, former non-executive directors or Sandip Mahajan, who was replaced as CFO this month having taken on the role in February this year.

This is the fourth investigation into the company’s financials in the past two years.

In October 2016, the FRC launched an investigation into the reporting of accrued income on “complex contracts” and goodwill allocated to the group’s former healthcare division.

In July this year, the FRC began a probe into Deloitte’s auditing of the accounts for the financial years 2015 and 2016, while in August the Financial Conduct Authority opened an investigation into the timing and content of a profit warning Mitie issued in September 2016.

However, the FRC today ended the first of its investigations relating to the group’s former healthcare division, with no further action being taken.

The new investigation comes as the facilities management company continues its turnaround efforts after a turbulent couple of years.

In its most recent full-year results for the 12 months to 31 March 2017, the firm reported a £42.9m operating loss in a year that saw 3,000 jobs cut.

Mitie’s turnaround plan includes Project Helix, designed to reduce the complexity of the business’s legal structure and operations, and its Connected Workspaces programme, aimed at increasing the IT capability of its various divisions.

But this transformation is consuming cash, as revealed in today’s half-year results for the six months to 30 September 2017.

Mitie reported that debt increased 17.3 per cent year on year to £172.6m and operational cashflow fell from -£1.6m to -£6.7m.

Mitie chief executive Phil Bentley told to investors this morning that the transformations meant “we’re having to invest more upfront” and that “the benefits can be lumpy”.

“Do we see the fruits of our labours over the last six months? Probably not. But change takes time,” he added.

The lag in the transformation’s pay-off was reflected in the company’s half-year profit, which was down 38 per cent compared with the same six months of 2016 to £14.8m.

However, revenue across the group was up 3.9 per cent to £959.7m.

Mr Bentley said the firm’s engineering and security services both performed well. The former, which remains the group’s largest division, saw profit grow 4.1 per cent to £15.1m on revenue of £404.3m.

Mr Bentley said: “We delivered the first six months in line with market expectations.”

The ongoing cost of the transformation is expected to be £15m for the 2018 financial year and £10m for the 2019 financial year.

Shares in Mitie were up marginally by 0.4 per cent this morning following the company’s results and the investigation announcement.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.