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Mitie profits down but shares nudge up

Outsourcing giant Mitie has published a 6% fall in profits over the year, reflecting a bigger-than-expected set of costs, according to City A.M.

Significantly, though, many commentators have Tweeted about the company’s share price recovering a little on the news (we’re not going to quote them here as the price could fluctuate in any direction by the time you read this).

Equally significantly, the organization’s chairman is calling for “wholesale sector recalibration” – which is a lengthy way of suggesting that investors are expecting too much from the entire outsourcing sector. This will be an issue for many who had made investments assuming certain returns which now look impossible; there isn’t going to be a major adjustment back because the entire sector has been priced overoptimistically.

This will affect more than the outsourcing sector itself. Investors come not only in the form of individuals but in the shape of institutions, pension funds and many others. If the outsourcing sector’s recalibration starts to hit pensions you could imagine the criticisms of the last few years starting to look like minor squalls.

Or people could start investing with a more realistic outlook – but what appears certain is that after an initial boom, outsourcing is maturing into a steady business rather than a get-rich-quick scheme for people throwing money at it. Longer term this is likely to prove preferable.

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