After Three Consecutive Loss Warnings, Mitie Dumps its Healthcare Business

Speculations were already made of Mitie discontinuing its healthcare arm, however, the real shocker came in when the British strategic outsourcing and energy services giant announced the selling amount. After several loss-making quarters, the group had to sell its entire healthcare business unit for just £2 that it bought for £111 Million in 2012.

To compensate arm’s trading losses, the group also paid an additional amount of almost £9.45 Million to the new owner, Apposite Capital – a specialist healthcare investor. Further, the company wrote off nearly £36.8m in costs as part of the sale characterising the embarrassing downsized value of the arm. In November 2016, Mitie had placed a revaluation of its healthcare arm after the FTSE 250 outsourcer incurred a loss of around £100 Million in the previous months.  

Poor Performance

Both ‘Complete Care’ and ‘Enara’ have been loss making entities for Mitie throughout 2016.  While Complete Care offers at-home ‘nurse-led’ services across England and Wales, Enara — trading under MiHomecare, provides at-home care for patients who need frequent medical assistance and support owing to infirmity or chronic illness, accounting for nearly 80,000 visits each week. Both the organisations collectively employ close to 3,000 people and have been left squandered by local council spending cuts and rising staff costs.

Change in Leadership

Ruby McGregor-Smith’s position at the helm ended last December with British Gas boss Phil Bentley getting appointed as the new CEO of Mitie Group PLC.  The new leadership certainly meant that one should expect few surprising announcements over the next couple of months. The company is reportedly planning to add an employee representative to its board amidst its latest move as part of the restructuring process articulated by Mr Bentley.

UK’s Troubled Care Market

State councils have been compelling big firms to pitch for loss-making healthcare contracts if the compulsory costs of training, apprenticeships, and pensions are taken into account. Moreover, increasing dominance of unregulated businesses hiring resources at lower wages has further impacted the market. According to some of the online sources, the former boss of the firm McGregor-Smith frequently mentioned that unregulated companies were a major factor behind the company’s poor performance. Meanwhile, bidding wars are making the situation even worst as state authorities urge to reduce the cost of care. 

What to Expect in the Foreseeable Future?

When Mitie acquired Enara, it was the countries fourth largest home care provider. However, commissions pertaining to lower homecare charges and cut off volumes of care made a drastic impact on the business.

UK’s expanding geriatric population base and increasing demand for healthcare aids were suggested to support the country’s at-home healthcare business.  But adherence to mandatory budget limitations forced by local authorities coupled with rising operational costs owing to measures such as the National Living Wage, the healthcare industry is struck with a crisis situation. Several leading healthcare providers in the country are struggling to deal with rate cuts. Therefore, the move might serve best to Mitie’s interest. In the meantime, Mr Bentley is also left with an enormous task of reinvigorating the company’s pest control and housing maintenance business, which has been struggling to win new clients.  The change in leadership will invariably lead to an overhaul of the company’s policies but a sustainable feat still remains ambiguous.

By Anurag Sharma

Delivering high-quality research and consulting projects at tight deadlines remains Anurag Sharma's forte. An experienced market research professional, he has helped business of varied scales make key strategic decisions. Anurag is a specialist in the medical devices market research domain, and has accurately predicted the trends in the market. Anurag is an avid traveller and music aficionado; in his free time, he loves to introspect and plan ahead.

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