British outsourcer Mitie Group Plc has said that it has agreed to sell its catering and hospitality business to CH&CO for up to £85 million in cash as it pushes ahead with moves to simplify its operations.
The sale to CH&CO, which provides catering services to Britain's Queen Elizabeth, follows a strategic review of the business, Mitie said in a statement.
"Mitie's strategy is to invest in our core technology-led facilities management services, such as security, cleaning and engineering services, where we have a leading market position," CEO Phil BentleyBentley said.
He said that the deal with CH&CO would ensure competitive pricing for the catering unit's customers and, for Mitie, would free up funds for reinvestment and strengthen its balance sheet.
"Net debt to core earnings should fall by 0.6 times, which is important as Mitie's balance sheet has been a key share price driver over the past few years," Jefferies analysts said.
Bentley has fathered a rationalisation and cost-saving drive at the company since he took over as CEO at the end of 2016.
The catering unit reported audited revenues of £136.1 million and pre-tax profit of £4.1 million in the year ended on March 31. CH&CO will report revenue of about £300 million for the year ended on December 31, 2018.
Staff
The staff and senior management team of Mitie Catering will transfer to CH&CO and will continue to run the business, the company said.
The unit employs more than 3,600 people at about 330 sites across the UK and Ireland, while CH&CO employs about 6,500 people at more than 780 locations.
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