Mitie first-half profit falls 4.2 percent

(Reuters) - British outsourcing group Mitie Group plc <MTO.L> posted a 4.2 percent drop in adjusted operating profit for the first half of the year on Thursday, hit by earlier-flagged changes in contracts at its cleaning and environmental services division as well as a rise in administrative expenses.

Mitie, which provides engineering, security and cleaning services to clients including Sainsbury's <SBRY.L>, Vodafone <VOD.L> and Rolls-Royce <RR.L>, has been investing in technology and employee retention as part of a turnaround strategy.

The company has also been looking to divest non-core business and recently agreed to sell its social housing business to Mears Group plc <MERG.L> for 35 million pounds in cash, while it sold its pest control business to Rentokil Initial plc <RTO.L> for 40 million pounds in cash.

The company said its turnaround project was delivering in line with plans in its second year of implementation, and reiterated its expectation it would post modest top-line growth this year and boost margins to between 4.5 percent and 5.5 percent in the medium term.

Operating profit before other items fell to 38.4 million pounds ($49.1 million) for the six months ending Sept. 30, from 40.1 million pounds a year earlier.

Mitie also said it was looking at the need to stock up for the short-term in a small number of critical items ahead of the UK's planned departure from the European Union, adding the impact was not expected to be material for group results.

The company also said it was working with key suppliers to ensure continued availability of supply should any import disruptions impact finished products or raw materials for products that the group purchases from UK-based manufacturers.

Mitie said it had improved its recruitment tools and processes to provide access to a broader number of recruiters and is increasing its investment in apprenticeships to protect itself against any longer-term squeeze on the pool of available labour caused by Brexit.

(Reporting by Arathy S Nair in Bengaluru; editing by Patrick Graham)