INTERSERVE PLC LONDON (Reuters) - British outsourcing company Mitie (>> Mitie Group PLC) said its full-year operating profit was likely to be slightly lower than forecast, as cuts in local government spending pressure its home care and social housing businesses.
Shares in the company dropped more than 5 percent in early Tuesday trade, the biggest fall on the FTSE 250 <.FTMC> mid-cap index. They were down 4.4 percent at 279 pence by 8:23 a.m.
"A small profit warning which we believe could well be the start of a few more issues emerging," said Whitman Howard analyst Stephen Rawlinson.
"It is not new news that local authority budgets are constrained, Mears (>> Mears Group PLC) and Interserve (>> Interserve plc) have told us already, but clearly expectations have been set at the wrong level or perhaps there are underlying issues that are now starting to surface," he added.
He has a "sell" rating on the stock.
Mitie, whose property management and home care businesses account for around 10 and 5 percent of group revenue respectively, said it would continue to invest in and support the businesses and was confident of longer-term opportunities.
The company, which runs services ranging from maintenance and cleaning to baggage screening at London's Heathrow airport, also said full-year revenues would be broadly in line with expectations due to a strong performance in its facilities management business.
It was expected to report 113.65 million pounds in pretax profits, according to the average estimate in a Thomson Reuters poll of 11 analysts before its trading statement.
Mitie reported the total losses from its exit of its mechanical and electrical engineering construction business would now range between 15 and 16 million pounds.
It will report its preliminary results for the full year on May 18.
(Reporting by Li-mei Hoang; Editing by Mark Potter)
