In November, Phil Bentley took a big punt. On himself. Having just been hired to clean up Mitie, he decided to buy £3.6m of shares in the troubled outsourcer.
It was a bold move, but not out of character. In 2014, he took a £2.4m stake in his then employer, Cable & Wireless Communications. Two years later, Bentley and investors pocketed a chunky windfall when the telecoms company was bought by American cable tycoon John Malone.
The task that faced him at Mitie was a lot more forbidding. His predecessor there, Baroness (Ruby) McGregor-Smith, had left an unholy mess in her wake.
Under the “prickly peer”, Mitie grew into an outsourcing hydra. It performed myriad tasks, from cutting grass for councils to running office blocks and immigration detention centres.
As its empire increased, so did the questions about McGregor-Smith’s hunger for acquisitions and about Mitie’s accounting policies.
Last September, she issued a profit warning, blamed on Brexit uncertainty and the living wage. Within weeks, the former business adviser to David Cameron was replaced by Bentley, the former boss of British Gas.
He soon hired auditors from KPMG to scour the books. Last month, Mitie took a £50m writedown and, in a veiled swipe at McGregor- Smith, said its accounting methods had not been as “conservative” as rivals.
Tomorrow, Bentley will attempt to draw a line under those woes. Alongside the annual results, he will present his strategic plan to revitalise Mitie. Bentley, 58, will cut jobs and wants to slap some tech sheen on the prosaic outsourcer; he believes office blocks can be managed more efficiently by parsing the data captured by security cameras and other devices.
Analysts at UBS expect pre-tax profits to slump from £98m to £29.5m for the year to April, then rebound to £45.5m next year. The broker argues that Mitie is on the right track, but that the “timing and scale of recovery are highly uncertain”. Too right. As the travails of G4S and Serco show, outsourcers are highly prone to blow-ups.
It is not as if a prospective investor would be picking up Mitie shares on the cheap. The shares have rallied hard since McGregor-Smith’s departure, closing last week at 246.8p. Another 10% rise and they will be back where they were in September, before her final profit warning. Such exuberance feels overdone, notwithstanding Bentley’s past exploits. Avoid.
