Government savings boost outsourcers

City A.M. Reporter
CONSTRUCTION and facilities management firm Mitie said it was well placed for profitable growth as the cash-strapped UK government looked to outsourcers to help it cut costs.

Mitie, which provides cleaning, security and maintenance services for banks and law courts, said it expected earnings for the year ending 31 March to be in line with its estimates.

“Budgetary pressure in the public sector is beginning to create substantial opportunities for outsourcing and this is evident in both the increasing use of framework agreements and in our growing sales pipeline,” the company said in a statement.

The FTSE All Share Support Services Index has gained 12 per cent since the coalition came to power in May last year.

Mitie shares, which have risen 14 per cent since the company in November posted a 12 per cent growth in first-half pretax profit, closed five per cent lower at 218.3p yesterday.

Meanwhile, support services firm Carillion said it had signed a memorandum of understanding with the British government, which is trying to get its suppliers to cut costs and pass on the savings.

It said it was changing “the scale and scope of outsourced services across a number of... existing contracts” that are worth about £200m, but that it was not changing market guidance. Analysts at RBS said the announcement was negative but not entirely unexpected.

The firm also announced £350m of contract wins, including a £45 deal to build accommodation for the armed forces at Whittington Barracks.