MITIE chief executive Ruby McGregor-Smith (CREDIT: Ed Robinson/OneRedEye)

MITIE axes mechanical and electrical engineering arm

Outsourcing group MITIE will axe hundreds of jobs as it closes its mechanical and electrical engineering contracts arm.

The Bristol-based company has said shrinking construction workloads have forced it to quit work on big one-off contracts such as installing air conditioning and electrical wiring in new office blocks, at a cost of £22.1m.

But the group, which employs about 72,400 staff in services including cleaning, airport baggage screening, roofing and home healthcare, posted a 5.4 per cent rise in underlying profits to £111.1m for the year to the end of March as more cash-strapped councils and companies turn to it.

The company's mechanical and electrical engineering contracts arm has been hit hard by a slump of almost 40 per cent in the market for new private commercial buildings. The division lost £3.1m in 2012 on shrinking revenues of £139.9m.

MITIE declined to say how many jobs will go as it is consulting staff, but said "hundreds not thousands" of workers are affected, mainly in the Midlands, the North and Scotland.

It will try to re-deploy staff to other areas of the business, a spokeswoman added, and still provides electrical and mechanical maintenance services.

Chief executive Ruby McGregor-Smith says: "We have had another good year with success in achieving organic growth driven by new and expanded contracts, as well as completing a strategic acquisition in healthcare.

“Whilst the economic environment remains challenging, we have reshaped the business to focus on long-term facilities management opportunities, as well as higher margin healthcare provision and energy consulting, all of which will support our growth aspirations.

“We expect outsourcing opportunities will continue to grow, with a trend towards more clients seeking to access integrated services. We are positioned to build further on our long track record of sustainable profitable growth.”

The company competes with stock market-listed outsourcing groups including Capita, G4S, Interserve and Serco in an industry worth an estimated £200bn in the UK.

MITIE – which stands for Management Incentive Through Investment Equity – added almost 9,000 staff during the year, including about 6,000 with a major healthcare acquisition.

Underlying revenues rose 8.4 per cent to almost £2bn and the group's order book grew 7 per cent to £9.3bn.

MITIE said challenging times mean outsourcing is an increasingly attractive option for companies, central government and local authorities.

It said: "The UK economy has not improved and many companies in the private sector continue to tread water at best. Central government and local authorities are also cutting costs wherever possible and the public sector continues to offer significant opportunity.

"Outsourcing is an industry that grew out of response to recession, and has continued to evolve in response to economic pressures."

It bought Enara Group for £111m last year to enter the £8bn home healthcare market for the first time. Enara provides care to people who require support due to illness, disability or infirmity in their own homes, and is trading ahead of target.

MITIE said facilities management contracts drove its growth during the year, including a five-year deal worth up to £930m with taxpayer-backed Lloyds Banking Group.

It also picked up a contract worth up to £61m to clean and maintain 2,200 sites for bookmaker Ladbrokes, a £100m tie-up with BSkyB to manage its UK estate for five years, and a £30m three-year painting contract from the London Borough of Hammersmith & Fulham.

It also won deals with councils including Bristol, Southampton, Norwich and Glasgow spanning CCTV monitoring to re-fitting kitchens.

Andrew Gibb, analyst at Investec Securities, said: "Unlike many of its peers, we have a growing confidence that margins can actually increase from here and with the strength of the balance sheet; this will facilitate further growth opportunities; organically or potentially through acquisitions."

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