By Esha Vaish
(Reuters) - British outsourcing services firm Mitie (L:MTO) warned of a further fall in profits for the second time in two months on Monday, saying the uncertainty amongst its customers over Brexit had resulted in a slowdown in new orders and that it had decided to withdraw from the low-margin home healthcare services market.
The provider of pest control to property cleaning, security and healthcare services reported a 39 percent fall in operating profits to 35.4 million pounds ($43.7 million) for the six months ended Sept. 30 and said it expected underlying earnings for the full year would be below its previous expectations.
It also reported a loss before tax of 100.4 million pounds, largely due to writedowns amounting to 117.2 million pounds on the value of the home healthcare services business which it has not put "under strategic review".
The shares were down 10 percent at 189 pence by 1014 GMT, losing the gains made since the company gave its first profit warning in September, when the shares plunged by nearly 30 percent to 194 pence.
Last month, the company said Chief Executive Ruby McGregor-Smith was to step down in December, to be replaced by Phil Bentley, a former head of British Gas.
While most British support services companies have reported some resilience for their businesses since the Brexit vote to leave the European Union, Mitie and rival Capita (L:CPI) have proved exceptions, suggesting that customer firms were being particularly hesitant in awarding new outsourcing contracts.
Analysts say Mitie could fare less well than rivals as it had entered the period of uncertainty as it had not factored in the costs of new labour laws as others had done last year and its discretionary services businesses that covered catering and facilities maintenance services had higher margins, making them more likely to be areas where clients were seeking cheaper services in a tough economic market.
"I think their costs are out of sync and their margins have always been very high relative to other people and that's the issue," Howard Seymour of Numis Securities told Reuters. "The market is not good, but it's not (bad) to the same degree that (Mitie are) saying by any stretch of imagination."
Mitie, which is facing higher labour costs following the introduction of the government's National Living Wage minimum pay rules in April, blamed its bleak forecast on lower levels of higher-margin project work and reduced discretionary spending by customers in its facilities management business.
However, it did say it had secured some new contract awards and renewals and therefore an "improved performance is expected in the second half of the year".
Canaccord Genuity cut its rating on Mitie shares to "hold" from "buy" and its forecast for full-year earnings before interest, tax and amortisation by 15 percent to 92 million pounds. Analysts on average had expected EBIT of 107 million pounds, according to a company-compiled survey.
($1=0.8102 pounds)