Mitie aims to grow in home care sector

The FTSE 250 group said it expects to benefit in its second half from a major deal with Lloyds Banking Group and last month’s purchase of Enara – the UK’s fourth-biggest home care business.

Mitie, which has a wide range of services spanning cleaning to pest control, reported 5.6 per cent revenue growth to £1.03bn in the six months to the end of September.

But Mitie said pre-tax profits slid almost 13 per cent to £37.7m after charging for amortisation, acquisitions and restructuring.

Chief executive Ruby McGregor-Smith said: “We have made this progress in the face of a tough economic climate and a difficult macro-economic outlook, with continuing challenges within our more cyclical markets.”

Mitie’s Lloyds contract – its biggest ever – started in August and sees more than 7,000 Mitie staff working at over 3,000 of the bank’s locations.

“We are now able to win and successfully deliver contracts many times larger than would have been possible even just a few years ago,” said Ms McGregor-Smith.

The group has also been awarded a major deal with BSkyB, worth £100m over five years, and a £70m-£120m contract with Golding Homes to repair and maintain housing in Kent for the next decade.

The group has contracts across Yorkshire, including painting, roofing, catering and cleaning arrangements with Yorkshire Water. It also has a catering deal with Bradford’s Hallmark Cards, plus a cleaning contract with Hull and East Yorkshire Hospitals NHS Trust.

Its £110.8m purchase of Enara Group in October saw Mitie enter the home care sector for the first time. Mitie said it provides a “scalable platform” to expand in an area that offers “exciting strategic opportunities and very good prospects for organic growth”. “The demographic and economic drivers of an ageing population, together with ongoing cost pressures, are encouraging a shift away from hospitals and residential care homes towards greater care in the community,” said Ms McGregor-Smith.

Corporate affairs director John Telling said Mitie has no plans for further acquisitions in this sector, but plans to build on Enara. Healthcare currently makes up about 10 per cent of Mitie’s business. Enara has 57 branches and its 6,000 staff have joined Mitie’s workforce. “Its predominantly helping elderly people in their homes through daily or twice-daily visits,” said Mr Telling. “It’s an organic growth story. As the population of the UK ages there will be an increasing need for people to be looked after at home.”

Mitie added it is seeing “significant opportunities” across the healthcare market and expects some of its “highly fragmented markets” to consolidate in future.

The group’s operating profit margin of 5.2 per cent was broadly level with a year ago. Operating profits before exceptionals increased 2.5 per cent to £52.9m.

Its order book grew by 4.7 per cent to £9bn and it has already secured 98 per cent of budgeted revenue for 2012/13. Another 72 per cent of its 2013/14 sales are also in place.

Mitie said it plans to quit the market for delivering large, one-off mechanical and electrical installations, which “does not help us deliver our strategy or meet the performance targets of the group”.

It has scaled down its work on this in its property management arm, and also booked £4.8m of charges for cost cuts in its technical facilities management and property management divisions. Analysts at Panmure Gordon said the results were “solid” amid tough markets.

“While challenges remain in its main markets the group has increased its order book, providing high revenue visibility, and management expect further progress to be made,” they said.

“The opportunities from driving efficiency gains for its clients through the outsourcing model remains in place.”