By Justin George Varghese
(Reuters) - British outsourcing company Mitie Group (LON:MTO) said it may cut up to 480 jobs as it overhauls its cleaning and engineering divisions, and said costs relating to its turnaround drive are "greater than previously anticipated".
The provider of pest control, cleaning, security and healthcare services is in the midst of a recovery programme after announcing a string of profit warnings, which it blamed on uncertainty surrounding Brexit and rising costs.
Mitie shares fell 4.6 percent to a three-month low of 246 pence in early trade.
British outsourcing companies such as Mitie, Capita and Carillion 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.
The outsourcer, 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.
"Cost-to-serve and general overhead is running 'marginally ahead of last year and earlier expectations' which hints at a softer EBITA (earnings before interest, tax and amortisation) margin progression," said Kean Marden, an equity analyst with Jefferies.
The company said revenue so far this year was ahead of its expectations and is 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 added that this trend should continue.
As part of its overhaul, Mitie has restated its accounts, announced it would appoint a new auditor and sold a loss-making unit.
"Transforming a large, diverse business such as Mitie is neither linear nor without challenges, but the programme remains on track. I expect to see the positive impact of our endeavours as we move into the second half of the year," acting Chief Executive Peter Dickinson said in a statement.