Mitie sells social housing division to Mears

News19 Nov 2018David Blackman

The troubled outsourcer announced this morning that it has offloaded its social housing repairs and maintenance business Mitie Property Management (MPM) for £35m, which is less than its gross assets of £40.3m.

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The payment will be split into £22.5m in cash at completion with the balance of £12.5m payable over the following two years subject to achieving certain performance milestones.

Mitie said it will use the majority of these proceeds to strengthen its balance sheet and accelerate partial repayment of the group’s defined benefit pension scheme deficit. The balance is set to be reinvested in core businesses.

MPM furnishes property repairs and maintenance services to more than 30 social housing providers in the UK, employing over 1,000 people.

The business booked revenues of £128m and earnings before interest and tax of £5m during the financial year ended 31 March 2018.

Vicky Fordham-Lewis, who headed MPM, will be a managing director within Mears’ enlarged operations.

The sale follows the decision by Mitie’s management to cut the valuation of the social housing business last year. The move was prompted by what the company’s audit committee described in its most recent annual report for 2017/18 as a deterioration in the climate for outsourcing within the social housing sector.

The committee had asked management to use a “much more cautious forecast” for MPM’s future profit and cash generation, while acknowledging that it remains a profitable business with growth potential.

In the 2017/18 annual report, Mitie reported a number of contract wins in Scotland, including Paisley-based housing association Williamsburgh and Sanctuary Scotland.

It also said it had renewed a partnership with Oak Tree Housing Association that will deliver maintenance services to 300 properties.

Phil Bentley, chief executive officer of Mitie, said the disposal of the social housing business would enable his company to focus on its core businesses.

He said: “MPM is a specialist provider of repairs and maintenance services to the social housing sector. The sale of MPM to Mears will allow Mitie to continue to focus and build scale in its core businesses. Mears is highly regarded in the social housing sector and has the specialist skills required to deliver to its client base.”