Investigation launched into Mitie’s financial statements

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

The investigation concerns a member of an accounting body involved in the results and is not an investigation of Mitie itself.

Mitie released a statement confirming that the FRC’s investigation did not involve any current directors, former non-executive directors or Sandip Mahajan, who was replaced as CFO this month after taking office in February of this year.

This is the fourth survey of the company’s finances in the past two years.

In October 2016, the FRC opened an investigation into the declaration of income receivable on “complex contracts” and goodwill allocated to the former healthcare division of the group.

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

However, the FRC today closed the first of its investigations into the group’s former health division, without any further action being taken.

The new investigation comes as the facilities management company continues its recovery efforts after a few turbulent years.

In its latest annual results for the 12-month period to March 31, 2017, the company reported an operating loss of £ 42.9million in a year that saw 3,000 job cuts.

Mitie’s turnaround plan includes the Helix project, designed to reduce the complexity of the company’s legal structure and operations, and its Connected Workspaces program, aimed at increasing the IT capacity of its various divisions.

But this transformation consumes cash, as revealed by today’s half-year results for the six-month period ended September 30, 2017.

Mitie said debt increased 17.3% year-on-year to £ 172.6million and operating cash flow fell from £ 1.6million to -6.7million. pound sterling.

Mitie chief executive Phil Bentley told investors this morning that the transformations mean “we need to invest more upstream” and “the benefits can be mixed”.

“Are we seeing the fruits of our labors over the past six months? Probably not. But change takes time, ”he added.

The lag in the transformation result was reflected in the company’s half-year profit, down 38% from the same half of 2016 to £ 14.8million.

However, the group’s revenue rose 3.9% to £ 959.7million.

Mr Bentley said the company’s engineering and safety departments have performed well. The former, which remains the group’s largest division, saw profits rise 4.1% to £ 15.1million on turnover of £ 404.3million.

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

The ongoing cost of the transformation is expected to be £ 15million for fiscal 2018 and £ 10million for fiscal 2019.

Mitie shares edged up 0.4% this morning following the company’s results and the announcement of the survey.


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